Amazon’s stock got a big boost today after an analyst made positive comments about Prime, the company’s two-day shipping program.
Today’s Amazon’s stock is up $12.73, or 2.8 percent to hit $468.26 a share in midday trading. That puts it on track to post four straight days of at least 1 percent gains, which would be the company’s longest stretch since November 2013, according to MarketWatch.
For the past year, Amazon’s stock has been on an upwards trajectory, surging 50 percent after starting the year off at just under $300 a share. MarketWatch said Amazon is the fourth-best performer in the S&P 500 this year and that Amazon’s worth more than 22 of the 30 companies in the Dow Jones Industrial Average (even though it’s not a member).
The rising stock price has resulted in its market value soaring to $216 billion, up $72.3 billion.
Today, UBS’s Eric Sheridan raised his rating to Buy from Neutral, and hiked his price target to $550 from $450. Sheridan called Amazon Prime a “flywheel” because of its compounding effects. First, it drives higher third-party sales on its marketplace, which in turn creates demand for its fulfillment operations, and finally leads to higher merchandise sales.
“The fast growing and higher spending Prime subscriber base has increased the importance of selling Prime eligible items,” he wrote in is note to investors. “Further, we believe the resultant increase in Prime eligible product selection will lead to greater site conversion, increased annual spend per customer, and ultimately, higher levels of gross merchandise value for Amazon.”
As we reported earlier today, Amazon now has about 44 million U.S. Prime members, who spend an average of $1,200 a year, compared to about $700 a year for non-members. For perspective, Costco has roughly 72 million paying members.
The Seattle e-commerce giant is hosting a major sales event tomorrow, which is supposed to top the largest shopping day of the year on Black Friday. In this case, the event is designed especially for Prime members, which could create more demand for the program.
The company’s second-quarter results will be released on July 23. For 2015, Sheridan increased his estimates to $105.2 billion in revenue, and $3.3 billion in adjusted operating profit from $102.7 billion and $2.6 billion, previously.