The stock of the online retail giant, Amazon.com Inc. (NASDAQ: AMZN) was up by 123 percent year to date, and several analysts expect that the company will continue to soar into 2016. Amazon performed really well in the previous year, but it appears like the ecommerce company’s impressive run is not yet over. Based on recent data, it continues to obtain market share from the traditional retailers and brick-and-mortar shops. Moreover, it seems like Amazon has tightened its grip on the retailing industry in the United States.
Amazon.com Inc. and Costco are similar in many ways. These two firms put customers ahead of earnings. Just recently, Amazon stated that over 3 million individuals signed up for its Prime service over the holidays. Although Amazon has not announced the total number of members of its Prime service, as well as its retention rate, it seems like the US retail powerhouse has a similar retention rate as that of Costco. Based on the estimates of analysts, the retention rate of Amazon may stand at 91 percent since it works really hard in order to keep its clients happy and satisfied.
During the last few years, the growth of Amazon and Costco slowed down a bit. For instance, during the fiscal year 2011, Costco posted a 14 percent growth in revenue. Market experts forecasted that the firm will register revenue growth of just 5 percent for the fiscal year 2016. Similarly, Amazon has experienced a slowdown too. In fiscal year 2011, Amazon posted growth in revenue of about 40.5 percent. Wall Street predicts that the ecommerce giant will experience growth of only 21 percent for fiscal year 2016.
Because Amazon is still growing at an impressive rate, certain analysts are very bullish on the stock. According to experts, Costco’s revenue for fiscal year 2016 will reach $122.2 billion. Meanwhile, they believe that the revenue of Amazon will hit $130 billion. Although the difference between the two companies is just $8 billion, there is still a significant difference in growth (5 percent against 21 percent).
Even though Amazon.com Inc still hasn’t released the total number of members for its Prime service, several market analysts believe that the retail giant has approximately 70 million members. This figure is in line with the 83 million members of Costco. According to analysts’ forecasts, the members of Prime spend up to $1,300 a year, while nonmembers spend about $450.
Market players still find the Amazon Web Services business appealing. The Amazon Web Services is anticipated to generate revenue amounting to $12 billion for this year and $18 billion for the year after that. Although AWS only accounts for a fraction of the total revenue of the company, it is approximately 43 percent of the operating profit of Amazon.com Inc.
Some analysts attempt to come up with various types of ways to value the US retail firm. However, some investors believe that as long as the company can significantly grow its top line, the AMZN stock is set to continue edging higher. It is just that simple. By the looks of it, Amazon is ready to have another successful year.