On Wednesday, BofA Securities maintained a Buy rating for Amazon.com (NASDAQ:AMZN) with a price target of $210.00. The firm highlighted new benefits for Amazon Prime members, which now include a $0.10 per gallon fuel discount at approximately 7,000 BP (NYSE:BP), Amoco, and ampm locations across the United States. This initiative is expected to provide Prime members with an average annual saving of $70.
The discount is available to Prime members who activate their Amazon account on earnify, complementing the existing $0.05 per gallon saving offered by BP's own app. The collaboration between Amazon and BP is set to expand to electric vehicle charging savings in 2025, though further details will be announced later. BofA Securities suggests that the increased Prime utilization could help balance the added costs of the fuel savings program.
Despite potential expenses that could reach up to $700 million for Amazon, assuming a 20% adoption rate among the 100 million U.S. Prime households, the analyst believes that the fuel savings could be a significant perk. This is particularly relevant as Amazon competes with Walmart+ and Costco (NASDAQ:COST), especially outside of major metropolitan areas. The analyst noted that 54% of survey respondents considering canceling Prime within the next 12 months felt the service was too expensive.
Adding such benefits could mitigate cost concerns and improve Prime signups, retention, and cross-selling into other high-margin services like ad-supported Prime Video. The firm's stance on Amazon remains positive, with a continued Buy recommendation.
In other recent news, Amazon.com Inc (NASDAQ:AMZN). is setting aggressive price caps for merchants on a new budget-focused storefront, aiming to compete with discount e-commerce platforms. The company plans to deliver orders to U.S. customers directly from a facility in Guangdong, China. On the other hand, Walmart (NYSE:WMT) Inc. has introduced an express delivery option that promises to deliver prescription medications to customers' doorsteps in as little as 30 minutes. The service is currently operational in six states with plans for expansion.
BMO Capital Markets has maintained an Outperform rating for Amazon, expecting an increase in cloud growth for the third quarter of 2024. BofA Securities also retained its Buy rating for the company, highlighting the global revenue potential of satellite services despite existing challenges. These ratings indicate confidence in Amazon's strategic positioning and long-term prospects.
In the media sector, Amazon Prime Video is set to host a special election night show, "Election Night Live with Brian Williams," aiming to provide non-partisan election results and analysis. These are among the recent developments involving Amazon.com Inc. and Walmart Inc., demonstrating their ongoing innovation and expansion across multiple sectors.
InvestingPro Insights
Amazon's strategic move to offer fuel discounts for Prime members aligns with its strong market position and financial performance. According to InvestingPro data, Amazon boasts a substantial market capitalization of $1.94 trillion, reflecting its dominant presence in the retail and technology sectors. The company's revenue growth of 12.32% over the last twelve months demonstrates its ability to expand its business, which is crucial for sustaining initiatives like the new Prime benefits.
InvestingPro Tips highlight Amazon as a "Prominent player in the Broadline Retail industry," which is evident in its approach to enhancing Prime membership value. The company's profitability over the last twelve months and analysts' predictions for continued profitability this year suggest that Amazon has the financial strength to support customer-centric programs like fuel discounts.
While Amazon trades at a high P/E ratio of 43.14, it's worth noting that it's also trading at a low P/E ratio relative to near-term earnings growth. This could indicate that the market expects the company's earnings to grow rapidly, potentially justifying investments in customer retention strategies such as the new Prime benefits.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 12 more InvestingPro Tips available for Amazon, providing a deeper understanding of the company's financial health and market position.
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