The bull case on Amazon.com, Inc. (AMZN) stock got easier to make after AMZN converted an already strong holiday selling season into something far more valuable, as millions of new customers signed up for Amazon Prime.
Amazon Prime — that basket of goodies including free two-day shipping and access to streaming movies and music — stands with Amazon Web Services as one of the two pillars of the retailer’s future growth.
Sure, AWS is where the hype is. Cloud-based computing is in a gold rush with giants such as Alphabet’s Google (GOOGL, GOOG), Microsoft (MSFT) and many more vying for dominance.
A boring old retail membership concept like Amazon Prime can hardly compete with the cloud for sex appeal, but it is enormously important to AMZN, and that’s why the latest news is so important to Amazon stock holders.
AMZN keeps the number of Amazon Prime members a closely-guarded secret, but suffice to say it’s expanding at a remarkable rate. As part of what it’s touting as a record-breaking holiday season, the company said it signed up more than 3 million new Amazon Prime members during the third week of December alone.
Indeed, the entire Amazon Prime umbrella had a very merry December. As CEO Jeff Bezos said in a press release:
“Over 200 million more items shipped for free with Prime this holiday, and members doubled their viewing hours of Prime Video compared to last year with the Amazon Original Series The Man in the High Castle leading the way as the most watched TV season ever on Prime Video.”
The company added that total viewing hours of Prime Video titles doubled year over year.
Amazon Prime Is Just Getting Started
This is a big deal. Amazon Prime members are far more valuable than regular AMZN shoppers. Indeed, analysts figure that Amazon Prime members shell out approximately $2,500 per year on goods, vs. only $330 for non-Prime users.
That’s why AMZN is investing so much into attracting new members with its video offerings. The idea is to lure them in with hit original content, and then get them shopping for everything else on AMZN, too.
As noted, Amazon doesn’t disclose the number of Amazon Prime members, but analysts guess that the business is going to be a huge driver of growth. For example, Deutsche Bank (DB) analysts think that by 2020 Amazon Prime could be worth $70 billion. That’s roughly 25% of what the entirety of AMZN is worth today.
Amazon stock is up 115% in 2015 with three sessions to go and has been one of the most important drivers of positive market performance all year long. No one knows what the new year holds for equities, but it’s a good bet that AMZN will once again carry them on its back.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
