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Amazon's Retail & Budding Web Services Make It a Real Deal

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It’s been 13 years of Amazon.com, Inc.’s (AMZN - Free Report) Prime membership service. Now, the service has reached 100 million subscribers after adding more members in 2017 than in any other year. Amazon had shipped more than 5 billion items last year.

CEO Jeff Bezos did update investors on a number of key milestones in his annual letter to shareholders, but, market pundits said that Prime subscriber numbers were the most encouraging. In fact, the total count of Amazon Web Services active users, including the Prime numbers, was up 250% last year.

Amazon Web Services currently has nearly $20 billion in annual revenues. The company acknowledged 2017 as the best year for hardware sales. Among the products, the Echo range of devices was a bestseller. Amazon also created more than 130,000 jobs last year.

GBH Insights head of technology research Daniel Ives said that Bezos will increase outlays by another 20% this year banking on Prime subscribers’ growth, and is on path for stronger-than-expected organic growth in 2018.

Here’s How HBO, Netflix and Tinder Compare

While the Prime subscriber count is ticking up by the minute, let’s see how the number compares to those of other subscription services?

Compared to Amazon Prime, HBO and Netfix have more subscribers throughout the globe at 142 million and 125 million, respectively. On the other hand, subscription businesses including Spotify, Hulu and Tinder have fewer global subscribers at 71 million, 17 million and 3 million users, in that order.

Burgeoning Retail Business

As per Credit Suisse Group AG (CS - Free Report) , Amazon is positioned to capture the next wave of online retail. Amazon acquired Whole Foods Market last year and is aiming to expand its fresh food offerings. At the same time, it is trying to succed in harder-to-deliver categories like apparels through its Prime Wardrobe segment.

Credit Suisse, in the meantime, has raised its 12-month target price on Amazon to $1,800 from $1,750 on Apr 20 after it noted meaningful revenue growth on flourishing segments like Amazon Web Services and online retail.

What If You Bet $1,000 on Amazon 10 Years Ago?

Amazon’s success, in part, explains why Bezos’ net worth is just shy of $130 billion. In fact, your investment of $1,000 in 2008 would now be $19,300, or more than 19 times including price uptick and dividend gains reinvested, per CNBC calculations.

Warren Buffett, chief executive officer of Berkshire Hathaway Inc. (BRK.B - Free Report) admitted that he didn’t realise the value of Amazon at first. He underestimated the brilliance of Bezos’ execution and went on to say that Bezos is the “most remarkable business person of our age.”

Amazon Stock Verdict

While Amazon’s high-profile membership service set a milestone, its central retail business is expected to gain steadily this year. Amazon’s aggressive expansion, unique market positioning and capability to disrupt new industries, in the meantime, helped its stock scale new highs despite lofty valuations. Amazon has outperformed the Internet - Commerce industry in the past year (+68.3% vs +48.5%).

In fact, the company’s projected growth rate for the current year is 89.9%, while the broader industry is expected to gain only 11.6%. To top it, investors have seen two upward earnings estimate revisions, compared with none lower, at least when looking at the current-year time frame. And the consensus estimate for Amazon has trended upward over the past 60 days, as estimates have risen from $8.49/share to $8.64/share right now. 

If this wasn’t enough, the company has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +12.08%. A solid Zacks Rank and positive ESP have resulted in an earnings beat 70% of the times over the past decade. The company is expected to report earnings results for the quarter ending March on Apr 26.

Amazon.com, Inc. Price and EPS Surprise

 

You can see the complete list of today’s Zacks #1 Rank stocks here.

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