Amazon’s Buy with Prime is a step forward, but the stock is still expensive

By Waseem Akram On Jan 11, 2023

Amazon’s ( AMZN ) soon-to-be-widely-available Buy with Prime service, which allows Prime members to use their Amazon accounts to shop with other online merchants, could be a revenue channel- into profit for the e-commerce giant. However, the Club’s stock is still expensive, a high multiple compared to the general stock market. Amazon said Tuesday it is making Buy with Prime, which launched as an invitation-only program last year, available to US online retailers by the end of January. The service allows Amazon Prime members to shop directly on other retailers’ websites, and in turn helps those outlets leverage the roughly 200 million members at Prime. The service also promises free, 2-day delivery. The company said it expects Buy with Prime to increase customers’ conversion from browsing to purchase by around 25%. Buy with Prime “allows merchants to build customer relationships and brand loyalty while offering conversion-driving benefits,” Amazon said in a statement. Shares of Amazon, which closed out 2022 down more than 50%, have gone back a little at the beginning of this year. The stock was trading up about 2.7% midday Tuesday, at $89.69 a share. The news comes as Amazon is facing slower sales growth and accumulating macroeconomic headwinds. Meanwhile, the company has been plagued by ballooning costs and a bloated workforce, partly due to over-hiring at the height of the Covid-19 pandemic when e-commerce demand was strongest. . CEO Andy Jassy last week announced plans to cut 18,000 jobs at the company – a move that is unlikely to go far enough. But Buy With Prime should help Amazon use some of the extra warehouse capacity it invested earlier in the pandemic and related costs, analysts said. . “By reselling part of their logistics/distribution/fulfillment capacity, they are generating incremental revenue and optimizing their cost structure,” said Mark Mahaney, head of the research team at Inter- Evercore ISI, told CNBC in an email on Tuesday. “I would also think with the excellence of AMZN’s logistics that this would be a service that would be well received by both buyers and consumers,” he said. Aaron Kessler, managing director for coverage in the region internet at Raymond James, in an email to CNBC on Tuesday that Buy with Prime will “help at the margin by improving usage [Amazon’s] fulfillment network.” The new service offers members familiar key benefits such as fast shopping and fast delivery. In addition, Amazon will manage the purchase life cycle, including order processing, product packaging and delivery. The Club takes Amazon’s Buy with Prime offer positively for its ability to fill excess capacity, allow merchants to maintain customer relationships and provide another avenue to sell to non-customers. start their search on Amazon’s website. And we are not buying more shares on Tuesday’s news. We continue to look for Amazon to reduce its headcount and better manage its costs. Reserve to continue to erode growth at the high-priced e-commerce giant.(The Jim Cramer Charitable Trust is long AMZN. See here for a complete list of stocks.) bscriber to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim trades. Jim waits 45 minutes after submitting a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim has discussed a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE HOUSE CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND OUR PRIVACY POLICY, INCLUDING OUR DISCLAIMER. NO RESPONSIBILITY OR OBLIGATION EXISTS, OR IS CREATED, FOR ANY INFORMATION PROVIDED BY JOINING THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR SPECIFICATIONS ARE GUARANTEED.

Workers load packages into Amazon Rivian Electric trucks at an Amazon facility in Poway, California, November 16, 2022.

Sandy Huffaker | Reuters

Amazon‘s (AMZN) soon to be widely available Shop with Prime service, which allows Prime members to use their Amazon accounts to shop with other online merchants, will be a profitable revenue channel to the e-commerce giant. However, the Club’s stock is still expensive, a high multiple compared to the general stock market.