Amazon.com, Inc. (AMZN) Ramps up for Black Friday

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Amazon.com, Inc. (AMZN) stock price has been going absolutely bonkers this year if you haven’t noticed. Up 100% on the year, the e-commerce giant is the second-best performer in the entire S&P 500, trailing only Netflix (NFLX) and its freakish 120% rally.

Amazon.com, Inc. (AMZN) Ramps up for Black FridayThe run-up has been fueled by a stubborn series of stupendous quarterly results, including two consecutive quarters of surprise profits and consensus-topping revenue hauls.

But Amazon isn’t done yet.

Now that the leaves are changing and Halloween has come and gone, it’s time for retailers’ favorite time of the year: the holiday shopping season. And boy, oh boy, is AMZN ready.

Black Friday Deals Now Live

Sparing no time, Amazon’s Black Friday Deals Store went live on Sunday, Nov. 1. The site will feature tens of thousands of deals on all sorts of products, from electronics and clothing to jewelry and kitchenware, and will last through Dec. 22 (sorry, last-minute shoppers).

But while sales through the Black Friday Deals Store surely won’t be anything to scoff at, the real catalyst for Amazon stock moving forward should come through another revenue source: Prime memberships.

Once again, AMZN has thought of an ingenious way to convert regular shoppers to paying Prime members, offering more than 30,000 “Lightning Deals” to Prime members 30 minutes early. That can be a huge difference for some of the year’s hottest-selling toys and electronics, which can practically sell out in the blink of an eye.

Prime Day Reinforces Member Importance

Amazon stock holders may recall Amazon Prime Day, the company’s first ever one-day sales holiday, which occurred July 15, 2015. The event was a massive success, and Amazon sold more units on Prime Day than Black Friday 2014, its most successful Black Friday on record.

But more importantly, Amazon signed up more Prime members than any day in its corporate history. Yes, it was giving out free 30-day memberships, but if any meaningful percentage of those 30-day members convert to paying members, it’ll still be a huge win.

Similar to Costco’s (COST) model, AMZN generally makes but a small margin on each transaction, and with Prime now coming with free two-day delivery, its own streaming video service, Amazon Music and a laundry list of other perks, those margins become much narrower. That’s where the $99 annual membership comes in.

Like Costco, the subscription is where Amazon can firmly enter the black.

Bernstein estimated in early October that there were upward of 40 million Prime Members worldwide, implying upward of $4 billion in revenue from subscriptions alone. Considering the value-adds Amazon has been piling onto Prime, the company could easily hike that figure in coming years.

Amazon did just that in March 2014 without much pushback from the market when it raised fees 25%, from $79 to $99 a year.

Yet for a company the size of AMZN, which is expected to boast revenue of $107 billion this year, $4 billion is material but not the type of money that’ll make ya or break ya.

The biggest benefit of Prime members is that they tend to be more motivated to buy more stuff — like when they get exclusive deals through the Black Friday Deals Store, for instance.

After a year of blowout quarter after blowout quarter, Amazon’s fourth quarter may turn out to be the most interesting yet.

As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/amzn-stock-amazon-com-inc-prime/.

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