Amazon Reveals It Has 100 Million Prime Members; Is the Stock Worth Buying?
Amazon Inc. (AMZN) was lighting up the headlines on Wednesday after CEO Jeff Bezos revealed the company had more than 100 million Prime members. While that’s a bullish long-term signal, AMZN share prices won’t be spared should first-quarter earnings fail to meet their lofty expectations.
In his annual shareholder letter, Bezos revealed his company’s competitive advantage in an era of “ever-rising consumer expectations.”
The carefully crafted letter revealed that subscribers to Prime, Amazon’s free shipping services, exceeded 100 million by the end of 2017.
The $99-per-year membership is coming off its best year for signups, putting to rest any fears that the company would struggle to attract lower-income households. The premium service shipped more than 5 billion items last year alone.
Bezos wrote the following in his letter:
“How do you stay ahead of ever-rising customer expectations?There’s no single way to do it – it’s a combination of many things. But high standards (widely deployed and at all levels of detail) are certainly a big part of it.”
The letter also spoke about the importance of “high standards” in business, including setting the “scope” for realistic expectations.
Amazon Shares: Are They Worth Buying?
Shares of the e-commerce company rose 1.6% on Wednesday, easily outpacing the technology and broader market averages. However, analysts warn that volatility could be in store for AMZN ahead of next week’s earnings call.
While the company capped off a solid 2017, soft margin guidance and rising investment at the start of 2018 could disappoint lofty expectations set by analysts.
At the same time, Amazon has been at the center of the selloff of so-called FAANG stocks, which refers to leading tech companies Facebook, Apple, Amazon, Netflix and Google-parent Alphabet. This culminated in a staggering $324 billion loss between Mar. 16 and Apr. 3.
A rollover in tech shares has been a major theme in the last several Wall Street meltdowns. The return of volatility post-earnings will have an immediate impact on technology companies, which are heavily influenced by risk sentiment.
Short-term volatility aside, Amazon still has a number of advantages for investors who can afford the price-per-share of $1,527.84. Chief among them is the dominance of Amazon Web Services (AWS), which controls the lion’s share of the cloud computing market. AWS currently owns roughly 47% of the public cloud market.
Under the guidance of Bezos, the company continues to act as a disruptive force in the technology industry, which likely means more avenues for growth in the long term. Partnerships with Berkshire Hathaway (BRK.A., BRK.B) and JPMorgan Chase & Co (JPM) also give Amazon the power to disrupt industries from healthcare to entertainment.
Amazon’s Q1 2018 report is due Apr. 26.
Featured image courtesy of Shutterstock.