Why Amazon stock crushed the market today

An analyst feels that Prime is worth a lot more than its price tag suggests.

| More on:
amazon.com stock represented by man holding parcel printed with amazon logo

Image source: Amazon.com

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

On one of the better days for the stock market in recent times, Amazon (NASDAQ: AMZN) was a standout. On a general resurgence in tech stocks and a very positive new analyst note, the giant online retailer's stock zoomed more than 5% higher on Wednesday, easily topping the 1.5% gain of the bellwether S&P 500 index.

So what

The tech rally was certainly a tailwind for Amazon at the end of the day, but investors were probably more encouraged by that research note. It was written by JPMorgan Chase analyst Doug Anmuth, who shared a very heartening update on the company's Prime loyalty program.

Following what he calls a "deep dive" into Prime's present and future, Anmuth came up with a new estimate of the program's value to its subscribers. All told, according to his calculations, Prime membership confers roughly $1,100 in annual benefits, such as free shipping and savings on items like drug prescriptions. This makes it quite the compelling value proposition even at the recently increased rate of $139 per year.

It also makes it an increasingly more attractive add-on for Amazon customers. Again according to his estimates, Anmuth says those yearly benefits totaled around $1,000 in 2020, and only approximately $544 in 2016.

Now what

Not surprisingly, the prognosticator is very bullish on Amazon stock. With his new take, he's maintaining his overweight (buy) recommendation on it, at a price target of $200 per share. This level is nearly double that of the stock's most recent closing price, even after Wednesday's pop. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Eric Volkman has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A man sits in casual clothes in front of a computer amid graphic images of data superimposed on the image, as though he is engaged in IT or hacking activities.
International Stock News

What did Nasdaq high flyers Tesla and Alphabet just report?

Nasdaq earnings season continues with Google-parent Alphabet and Tesla reporting overnight.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Nvidia stock has pulled back over 10%. Here's what history says could happen next

Nvidia has a 100% success rate of rebounding after pullbacks of 10% or more. Will this time be different?

Read more »

Digital rocket on a laptop.
International Stock News

Why Nvidia stock jumped on Monday

Nvidia investors got some big news, and the stock is also getting a boost thanks to bullish Wall Street analysts.

Read more »

a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.
International Stock News

Why CrowdStrike stock just crashed again

There likely isn't a quick way to restore confidence.

Read more »

A man wearing a suit and holding an EV charger gives the thumbs up.
International Stock News

Why Tesla stock popped ahead of earnings day

Investors will soon see what Tesla's surprising Q2 sales volume means for the bottom line.

Read more »

A little Asian girl is so excited by the bubbles coming out of her bubble machine.
International Stock News

Opinion: This Nvidia forecast all but confirms that the artificial intelligence (AI) bubble will burst sooner rather than later

Nvidia's gross margin guidance points to pricing pressures that may signal an end to the irrational exuberance surrounding artificial intelligence…

Read more »

Hands reaching high for a trophy with a sunset in the background.
International Stock News

Is it too late to buy Nvidia stock in the second half of 2024?

The company has suffered from a recent sell-off, but maintains massive long-term potential.

Read more »

A white EV car and an electric vehicle pump with green highlighted swirls representing ASX lithium shares
International Stock News

Why Tesla could be the best 'Magnificent Seven' stock to own in the second half of 2024

Tesla's stock has been rallying of late, and there could be more gains to come in the weeks and months…

Read more »