Amazon (AMZN) Customer Loyalty Drops After Prime Price Hike

NEW YORK (TheStreet) -- Amazon (AMZN) saw its brand loyalty drop after the Amazon Prime price hike last week according to a new Brand Keys survey.

Shares of Amazon were gaining 0.7% to $376.45 Monday.

Brand Keys found that Amazon's customer loyalty rating dropped to 83% from 93% after the price hike which raised the price of Amazon Prime to $99 a year from $79 a year. Amazon held the top spot in customer loyalty since Brand Keys started tracking online retailers. Among Prime members, however, the company now ranks third behind eBay (EBAY) and Overstock.com (OSTK).

"Based on immediate Prime member reactions, they may have underestimated the negative effects of the increase," Brand Keys president Robert Passikoff said. "Consumer expectations are always on the increase, and when it comes to online retail, they operate in a 'what-have-you-done-for-me-recently?' paradigm. Price increases weren't what Prime Members were expecting."

Brand Keys surveyed 1,050 Amazon Prime members between March 14 and March 16 as part of the survey.

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TheStreet Ratings team rates AMAZON.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMAZON.COM INC (AMZN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 20.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMAZON.COM INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $0.58).
  • The gross profit margin for AMAZON.COM INC is currently lower than what is desirable, coming in at 30.26%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.93% trails the industry average.
  • AMZN's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that AMZN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.67 is low and demonstrates weak liquidity.
  • You can view the full analysis from the report here: AMZN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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