) is rumored to be rolling out an unlimited video streaming
service for Amazon Prime customers that will rival that of Netflix
Amazon Prime is a shipping program where customers pay a fixed
annual fee (currently $79) to get free two-day shipping for most
products sold. This service is cheaper than Netflix's Watch
Instantly service which cost $95.88 per year.
This decision should further popularize Amazon's Prime service
and attract more consumers to its online shopping platform. The
customer draw towards Amazon's shopping service should help the
company gain market share from online retail competitors like eBay
) as well as traditional brick and mortar players Wal-Mart (
), Costco (
) and Best Buy (BBY).
We have a
price estimate for Amazon stock, roughly 7% above market price.
See our full analysis and $181 price estimate for
Upside to Amazon's Retail Shopping Market Share
Amazon Prime has been well-received by customers and successful
in attracting business to its online shopping platform. Amazon
recently expanded its free shipping program to offer same day
delivery for an additional monthly fee of $6 to Amazon Prime
customers. 'Subscribe and Save' is another such program that offers
discounts to regular shoppers.
These initiatives have helped Amazon gain share in the online
retail market. Its share in U.S. online electronics & general
merchandise (EGM) market, for example, has increased from around
2.5% in 2006 to 6.5% in 2010, and we anticipate a further increase
to 13.5% by the end of our forecast period.
Amazon's new free online streaming service for Prime customers
seems targeted to generate a spike in customer adoption of the
program. Amazon can leverage the ensuing increase in Prime service
subscription towards an acceleration of online retail market share
To highlight the sensitivity of Amazon's equity value to U.S.
EGM market share, we estimate 18% upside to our
price estimate if Amazon's new offering sparks market share gains
towards 20% by the end of our forecast period (vs. our base 13.5%