Markets

Why Amazon Stock Climbed 14% Last Month

What happened

Shares of Amazon (NASDAQ: AMZN) moved higher in July, riding a bullish wave in e-commerce stocks as the U.S. 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 the month, 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.  An open Amazon box.

Image source: Amazon.

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.

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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 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 has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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