Why Amazon stock crushed the market today

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

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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.

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