With Expanded Sale, Amazon Hopes to Net New Prime Members

Goodbye, Black Friday; hello, "Black November." This year, e-commerce company Amazon (AMZN) is taking the "shopping holiday" further and beginning its blockbuster sales earlier.

In fact, Amazon's Christmas countdown started Tuesday, as the company unveiled the Black Friday deals store, which will remain "open" until Dec. 22. With this development, Amazon is showing its major, remaining bricks-and-mortar competitors Walmart and Target, among others, that it intends to keep gobbling up market share.

The result could be more profits for investors. Amazon shares fell slightly in Tuesday trading. 

Amazon's Black Friday store features a new deal every five minutes, as well as gift-giving guides. Amazon Prime members will see even better deals, including discounts of pre-order items such as video games, as well as free two-day shipping on an expanded list of items.

In recent years, fierce competition in the retail space has led stores to ramp up their Black Friday sales, as well as to open earlier. This year, beleaguered department store Macy's made headlines when it announced it will be open even earlier on Thanksgiving Day.

However, even Amazon has proven it's not immune from challenges that bedevil many retailers. In the third quarter, Amazon added 18 procurement centers to help improve logistics. The company had struggled to deliver products in a timely manner from its full warehouses, particularly during the last holiday season.   

But those centers are not yet operating as efficiently as the company had planned. Commenting on the company's third quarter earnings last week, the company's CFO Brian Olsavsky said the ramp-up issues had led to disappointing profits. The company posted earnings of $252 million profit, or 52 cents a share. Analysts had expected 78 cents a share. 

The company said that operating costs will continue to hinder its financial performance. Amazon provided guidance of operating income of between $0 and $1.25 billion for the fourth quarter. That's down from $2.2 billion for the same period in 2015. The analyst consensus had called for $1.62 billion in operating income. 

But other results for Amazon were strong. The company boosted revenue 29% over the previous year. Revenue from the company's Web services business rose 55%, and its second Prime Day, where customers can take advantage of discounts on a range of products, saw a 60% increase in orders. 

In addition, in the long term, the extra call centers are going to pay off. Amazon's nearly two-month-long holiday sales event should pull in even more Prime customers.

Amazon is notoriously tight-lipped when it comes to revealing Prime membership numbers, but analysts currently believe there may be as many as 80 million Prime subscribers worldwide, with 50 million here in the U.S. Last year, there were an estimated 50 million global subscribers and 30 million to 40 million in the U.S. That's an amazing rate of growth, but there is still room for more.

And that will boost Amazon's share price significantly. Although currently around $780 per share, Amazon could be the next stock to breach the $1,000-per-share threshold. Google, now trading as Alphabet, did this back in 2013, although it has since retreated.

Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells GOOGL? Learn more now.

Hang onto Amazon shares for the long term. With massive holiday sales underway, as well as plans in place to garner more lucrative customers, this e-commerce giant could grow even bigger.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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