Amazon flexes its brand power with Prime price hike
The e-commerce giant has raised the price of its Prime service by $20, and its members are sticking around.
Amazon.com (AMZN) announced Thursday that it is increasing the price of its Amazon Prime service, from $79 to $99. In this video, "Stock of the Day" host Mark Reeth and Motley Fool analyst David Hanson take a look at the reaction to this move -- which David says has largely been that, though customers aren't thrilled, they won't be cancelling their service.
The guys also point to the idea that rather than this being a move of necessity where the company is reacting to pressure from Wall Street to turn a profit for shareholders, David sees this much more as a move from a position of power. Amazon, like any good business, has the brand strength to increase prices without scaring off customers, and is taking advantage of that pricing power.
So is Amazon a buy today? The valuation of Amazon is a notoriously difficult one to understand considering its massive growth but tight margins and lack of a profit, but David does see the move today as an incremental positive for the company, that should bring in more cash quickly that can be allocated towards even more growth in the future.
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