Is Amazon’s Stock Ready for a Holiday Season Rally?

As Wall Street has been in the grips of a generative AI boom, which has seen stocks like Nvidia catapult beyond 200% growth, it’s perhaps been easy to miss consistent performers like Amazon.

As Amazon (NASDAQ: AMZN) reaches growth of around 80% for the 2023 calendar year, it’s certainly a welcome sight to see an upturn in fortunes for the retailer following a difficult 2022 in which AMZN shed around 50% of its value.

Although the stock still has some way to go in recovering lost ground as economic headwinds impacted many global markets owing to record-breaking inflation, geopolitical conflicts, and widespread tech stock sell-offs, the prospect of a holiday season rally could help Amazon to make fresh progress moving into the new year.

But what exactly is a holiday season rally?

In Search of Santa Claus

The theory of the Santa Claus rally has become a key talking point for investors. Each year, there’s plenty of discussion about how the rally works and whether a tangible boost for Wall Street can be achieved moving into the new year.

But is there any truth to it? The Santa Claus rally is certainly grounded in logic. Market commentators suggest that the rally stems from hedge funds calling time on tax-loss selling and instead seeking to pad their portfolios ahead of 2024.

In addition to this, stocks that receive a boost over the festive period as consumer spending typically takes an upward turn can help to sustain Santa Claus rallies further.

However, the effectiveness and consistency of Santa Claus rallies appear up for debate. According to a test run by Stock Investor using the idea of buying the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) the day after Christmas at the open and selling the close on New Year’s Eve, an upturn in value occurred 14 out of 30 times since 1993, or 46.7% of the time. In comparison, an average week for the SPY sees it close higher than it opens around 53.5% of the time.

Despite this contradictory performance history, there’s still optimism for a fresh rally in 2023, with news of a future Federal Reserve pivot on interest rate hikes propelling more investors to buy back into riskier stocks.

“The euphoria surrounding a potential Federal Reserve pivot has propelled all risky bets higher, and the upward momentum is expected to strengthen, thanks to the typical year-end Santa Claus rally,” acknowledges Shanthi Rexaline, Benzinga Editor.

Although Rexaline was quick to note that the impact of the Santa Claus rally could be “lackluster” due to a lack of quality on the upside of these riskier stocks.

Could Amazon Bring Festive Cheer?

While there’s much speculation about the impact of a Santa Claus rally throughout the S&P 500, stocks like Amazon offer plenty of optimism around the holiday period due to the retailer’s strong market position when it comes to consumer spending.

“The e-commerce giant Amazon is fully immersed in holiday preparations,” explains Maxim Manturov, head of investment research at Freedom Finance Europe. “After concluding the Prime Day extravaganza on October 10 and 11, the company is gearing up for the bustling year-end shopping season by announcing its intention to hire an additional 250,000 employees worldwide. Notably, these employees will work in full-time, part-time, and seasonal positions.”

“In anticipation of the active year-end sales period, Amazon is increasing its workforce by 100,000 people compared to the last quarter of 2022. Moreover, the company capitalizes on the momentum created by ‘Black Friday’ and ‘Cyber Monday’ sales, strategically timed towards the end of November and tied to Thanksgiving. The average target price from investment banks is around $1752, approximately 20% upside.”

This ramping up of seasonal preparations demonstrates Amazon’s ambitions to become a leading retailer during the festive period, and any upturn in consumer spending is more likely to be underlined by Amazon’s market performance.

In addition to this, Amazon appears set to stake its claim further as a leading tech firm, having recently made strides in the field of entertainment and telecommunications.

Amazon’s Bid for World Domination

In recent days, news broke that Amazon was in talks to invest in Diamond Sports Group, which is the United States’ largest programmer for regional sports.

With the group holding rights to broadcast games for over 40 major sports teams in the US, including around half of Major League Baseball and the NBA, as well as a third of teams in the National Hockey League, Amazon has sought to capitalize on Diamond’s recent bankruptcy and build on its presence in the world of streaming.

Amazon’s streaming efforts have also expanded into the world of entertainment, with the firm recently agreeing a deal with Games Workshop, creator of Warhammer 40,000 to turn the game into a series of film and TV projects.

Alongside its entertainment push, Amazon has also launched its first satellites for ‘Project Kuiper’ in an ambitious bid to expand operations into the field of telecommunications.

The extraordinary ambitions of Amazon in its bid to become a leading global resource for a variety of functions certainly make it an interesting long-term play for investors. However, with a clear emphasis on embracing the holiday season, it’s also clear that a Santa Claus rally would directly benefit the stock back on terra firma, too.