 |
| image by economywatch |
Amazon Stock price on Good Enough Earnings. Plus the amazon prime stock Price Is Going Up
1. Intro
On Feb. 18, Amazon will increase its Prime membership price from $119 to $14.99 per month for new members and renewals. This price increase is effective on Feb. 18, 2018, and does not apply to existing members or those who have already paid for a year or more of service with Amazon.
The news was first spotted by TechCrunch
2. The increasing popularity of Amazon Prime
We all know Amazon is the king of online retail. But, if you are not familiar with the company’s earnings, you would probably be surprised to know that it had a massive growth in its net income over the past three years. The company had reported an increase in its net income of 25% and 41% over the same period.
So, what is this big increase? We don’t know (we have no clue), but it seems there are a few reasons for the increase in Amazon Prime membership among the population:
• The growing demand for TV shows and movies (since they tend to contain more content than anything else)
• The increased demand for expanding their already large storage capacity (because of that growth in the number of online users)
• The increased demand for fast delivery services (which is also related to the above-mentioned storage capacity)
• The increasing number of Prime members
• The increasing number of Prime members who would like to buy branded items or other products from Amazon
• The increasing number of Prime members who would like to buy branded items or other products from Amazon but would like those items at a discount from Amazon's regular prices.
In addition, some analysts think that Amazon might be going on a roll with its growing popularity. Some have called it “Amazon Prime Day” – since it is one day only when almost all Prime subscribers can get discounted products offered by Amazon at promotional prices. The hype around this event has made many people curious about purchasing Prime membership; so, they are eager to see whether this event continues next year or not. More importantly, Amazon has promised that it will likely launch more products on prime deals during future prime days; so, this habit could continue for a long time considering how much we love their website and even other products they have launched recently!
3. Amazon's announcement of raising the price of Prime membership by 20%
Amazon's Prime price rise is great for those who already subscribe to Amazon Prime, but not so great for those who want to sign up. The news is probably mostly good news for Amazon stockholders, but it's also a vote of confidence from Amazon on the strength of its business, at least in the short term.
Amazon Prime has long been one of the most valuable businesses in the world. But with more than half a billion members, it's now worth more than $100 billion -- almost as much as its cash flow.
The company has long said it would have to raise prices eventually, but this is the first time that Prime -- which gives customers free two-day shipping and access to streaming video and music -- will cost more than $100 a year. Last week, Amazon said that pricing would be raised by 20% starting on Feb. 18 (the day after Black Friday). That now seems likely to happen this quarter too.
That means Amazon has raised its prices every year since 2011. For example last year, after a few months of price increases and adjustments (including nearly doubling the price of Prime over the subsequent six months), Prime membership was $119 a year with two-day shipping (for unlimited deliveries).
Here's what that looks like as an annualized chart: $119 / $1 billion = 14% increase per year ($1937/year) / 12 years = $1325 increase per year ($1937/year × 3 years) / 12 years = $1425 increase per year ($1937/year × 3 years) / 12 years = $1425 per quarter (or 16% after Jan.) ($1720/quarter) / 12 quarters = $1225 per quarter (or 22% after Jan.) ($933/quarter) / 4 quarters = $933 percent yearly change or an average of 15 percent per quarter (15 percent annually or 6 percent yearly) ($933 x 4 quarters or 18% annual change). $1 billion USD [PRIME membership] ≈$1088 million USD [prime membership]
And here are some charts showing the total change over time: USD 1 billion [PRIME membership] ≈USD 1088 million [prime membership]
For comparison, here are some charts showing how much cash flow Amazon reported in January: https://www.fool.com/investing/2017/01/28/
4. How will the increasing impact Amazon Prime members?
Amazon's stock price has hit a new 52-week high, as investors look ahead to the next round of Amazon earnings. The stock rose more than 7 percent to $1,937.13, its highest level since Dec. 1, 2017.
Amazon CEO Jeff Bezos has made it clear that he’s not done opening up new markets for Amazon Prime so far this year, with a net increase in the price of its Prime video streaming service.
The increase will be effective on Feb. 18 and will start at $14.99 for an annual membership for subscribers who have signed up since November 2018 and earlier. Amazon said it would also increase monthly rates by $2 to $10 starting Feb. 19, meaning an annual digital subscription will cost $119 and an annual physical one is set to cost $189.
The company previously charged customers $99 for a year-long subscription in November 2017 and was decreasing yearly prices by $2 each month until Jan. 31, when it increased monthly rates by about 10 percent. Those changes were part of an experiment to gauge the loyalty of Prime members to the service and how many customers had signed up in the past year, according to Amazon's website.
More recently, Amazon said that it would be getting rid of a 30-day free trial period for some products in January 2019, but would offer a one-year trial option after that if people wanted it. The company also plans on introducing Prime Music streaming as part of its subscription service later this year.
A spokeswoman for Amazon said in a statement: "We're constantly experimenting with how we can best serve our customers and make them more productive."
Amazon is also launching two new services later this year: Kindle Owners' Lending Library, which lets users borrow e-books from their local library and read them on Kindle devices; and Kindle Direct Publishing, which lets publishers send print books directly to users' Kindles via email or over Wi-Fi instead of shipping them through regular mail. The latter service is expected to launch soon after Kindle Owners' Lending Library ( KOL ), according to media reports.
5. Is there a chance that Prime membership will increase again soon?
A lot of people are wondering whether Amazon is going to increase the price of its Prime membership again. After Facebook and Google, Amazon Prime is the third most popular subscription service in the country. At first glance, it seems unlikely that Amazon will raise its prices again.
But, two key factors might change this: While both companies essentially have a monopoly on digital content distribution (Amazon owns e-books, music, and video streaming), Google has opened up apps for other services like search and Android smartphones (which means, for example, that all your YouTube videos can be viewed on a phone).
In any case, Amazon has been steadily increasing Prime membership over the past year. In 2017, it started charging $119 per year for it. In 2018, it raised its rates to $149 per year. And this spring, it increased membership fees to $199 per year. It remains to be seen whether another price increase will come soon or not.
6. Conclusion
After the big earnings announcement, Amazon's stock price has gone up by 2% on Monday, and by 2.6% on Tuesday. Amazon's stock price has been rising since the end of 2017, but it rose even higher in December 2018 when the company beat Wall Street expectations.
This is because Amazon's stock is at a high and hasn't dropped as much as other stocks lately. The company reported record revenue of $US51 billion ($A64 billion) in its latest quarter, which was up from $US43 billion ($A55 billion) a year earlier. Amazon also said it earned $US452 million ($A588 million) in profit for its fourth quarter ended January 31, 2018.