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Sturdy Prime to Aid Amazon's (AMZN) Growth in Q3 Earnings

Amazon 's AMZN Prime program is expected to play a pivotal role in its third-quarter 2018 results. Notably, the company is set to release its financial numbers on Oct 25.

Amazon Prime, launched more than a decade ago, is a subscription service which continues to gain traction, thanks to its customer friendly discounts, strengthening video and music content and expanding delivery services.

With all these, Amazon continues to witness growing adoption of Prime which is bolstering subscription revenues, consequently driving its top-line growth. Further, Prime is significantly aiding the company's online retail division, which forms the major part of its business.

In the last reported quarter, Amazon's retail subscription services sales totaled $3.408 billion. The figure surged 57.4% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of $3.305 billion.

We believe Prime will continue to deliver solid results driven by its expanding global footprint and grocery services. The Zacks Consensus Estimate for subscription services sales in the to-be-reported quarter is pegged at $3.648 billion.

Click here to know how the company's overall third-quarter performance is likely to be.

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote

Prime Day Results to Aid Growth

During the to-be-reported quarter, Amazon's 36-hours mega summer shopping event called "Prime Day" not only benefited the company but also the sellers and buyers on the back of numerous exciting and beneficial deals. In fact, small and medium businesses raked in sales exceeding $1.5 billion on the back of this event.

Further, the company has showcased more than one billion deals worldwide. In the first 10 hours of the event, the company reported that sales grew at a bigger and faster rate compared with the Prime Day event in 2017.

Furthermore, in the first 12 hours, the sales figure improved 89% compared with the last year's comparable figure. Further, the number of orders placed by the customers in the same time frame grew 69% year over year.

Notably, electronic products were the bestsellers in this shopping event.

We believe all these facts are likely to aid the Prime subscription sales in the third quarter.

Expanding Prime Services

Amazon unveiled Prime Book Box which is a subscription service in the third quarter. The service offers a box of children story books selected by the company's editors and comes with subscription plans ranging from one, two and three months.

This is likely to aid the company in gaining further momentum in the kids and students section.

In terms of grocery, the company introduced grocery pickup service which allows Prime shoppers at Whole Foods to shop via Prime Now and pick up these groceries within 30 minutes by parking their car at a reserved pickup spot.

Further, it expanded its grocery delivery service for natural and organic products rapidly in the third quarter and was able to reach 48 U.S. cities.

In terms of global expansion, Amazon rolled out Prime Reading in India in a bid to strengthen its presence in e-commerce space of the country.

We note that all these strong endeavors are expected to drive the Prime adoption rate in the to-be-reported quarter, which will drive the company's top-line.

Zacks Rank & Other Stocks to Consider

Currently, Amazon carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Expedia EXPE , IAC/InterActiveCorp IAC and EVINE Live EVLV . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term earnings growth rate for Expedia, IAC/InterActiveCorp and EVINE Live is currently pegged at 16.08%, 15% and 3%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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