Why Amazon shares climbed 14% last month

Shares of the tech giant gained on a strong earnings report and a broader wave of bullishness.

| More on:

Image source: Amazon

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Amazon.com, Inc (NASDAQ: AMZN) shares moved higher in July, riding a bullish wave in e-commerce stocks as the United States experienced another resurgence of COVID-19 cases. The tech giant also reported a blowout earnings report at the end of the month. According to data from S&P Global Market Intelligence, the stock finished the month up 14%. 

As you can see from the chart below, the stock got off to a strong start and held on to those gains for the duration of July, surging on its earnings report at the end.

^SPX Chart

^SPX data by YCharts

So what?

Amazon shares jumped out of the gate at the beginning of July. This early rise might have been part of broader market gains on a June unemployment report strong enough to suggest the economy was rebounding from the coronavirus crisis.

The stock then benefited from a rise in COVID-19 cases that led some states to pump the brakes on reopening measures and caused investors to anticipate extended impact from the pandemic. These factors suggest that reliance on digital services will only increase.

With its strength in e-commerce, cloud computing, and video streaming, Amazon has been one of the biggest beneficiaries of the pandemic. Its stock has about doubled from its depths during March and now tops a $1.5 trillion market value.

The company also launched a new healthcare partnership with Crossover Health in July to open clinics for Amazon employees. The move potentially brings Amazon closer to disrupting the $4 trillion healthcare market and finding a new avenue for growth.  

The company's second-quarter earnings report confirmed investors' high expectations, as sales jumped 40% in the quarter and earnings per share nearly doubled.

Now what

The second-quarter report was Amazon's best ever and a testament to its strength in e-commerce and areas like cloud computing. It expects to grow its warehouse space by 50% in the second half of the year as it ramps up for the holiday season and a delayed Prime Day.

This anticipated increase in warehouse capacity signifies that investors should expect the company's breakneck growth to continue. While Amazon stock is still pricey according to conventional metrics, the surge in profitability shows that it still has plenty of upside potential.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors.  Jeremy Bowman owns shares of Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Nvidia share price slips despite 94% revenue growth

Q3 earnings beat expectations, but what about guidance?

Read more »

high, climbing, record high
International Stock News

Could the S&P 500 Index hit 6,500 by the end of 2025?

Could the index climb higher?

Read more »

a small child holds his chin with his head on the side in a serious thinking pose against a background of graphic question marks and a yellow lightbulb.
International Stock News

Is it too late to buy Nvidia shares?

Is Nvidia stock a buy ahead of its third-quarter earnings report tomorrow?

Read more »

a group of people stand examining a large glowing cystral ball held in the hands of one of the group members while the others regard it with various expressions of wonder, curiousity and scepticism.
International Stock News

Here's what to expect from Nvidia on November 20

Can Nvidia score another win?

Read more »

Two people lazing in deck chairs on a beautiful sandy beach through their hands up in the air.
International Stock News

2 no-brainer Warren Buffett stocks to buy right now

While replicating Buffett's success isn't possible, there are a handful of his investments that are no-brainer buys.

Read more »

A man with a beard and wearing dark sunglasses and a beanie head covering raises a fist in happy celebration as he sits at is computer in a home environment.
International Stock News

3 reasons to buy Nvidia stock before November 20

This week marks a big moment for tech investors as perhaps the most anticipated earnings of the year will be…

Read more »

A woman smiles over her shoulder as she sits in the driver's seat of a car with keys in hand.
International Stock News

Why Tesla stock just popped

Tesla stock raced ahead Monday after Bloomberg reported the incoming Trump administration's intentions around self-driving vehicles.

Read more »

A woman holds her hand out under a graphic hologram image of a human brain with brightly lit segments and section points.
International Stock News

Prediction: Nvidia stock is going to soar after November 20

Nvidia is scheduled to report third-quarter earnings on Wednesday.

Read more »