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Looking at Amazon's Future Beyond Prime Day

Ahead of Amazon Prime Day, a look at the company's longer-term plans.

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With Amazon's annual Prime Day right around the corner, we thought we'd take a look at what this event reveals about the company's longer-term strategic priorities and how it supports the assumptions behind our $2300 fair value estimate.

As a starting point, we believe Amazon has been undergoing a strategic shift the past several years on two fronts. The first is shifting away from a first-party marketplace where Amazon directly sells products to consumers, to more of a third-party platform where vendors sell products and Amazon takes a commission from the sale. This is important not only because this is a higher-margin transaction from Amazon, but also it unlocks additional services that Amazon can offer its vendors. The most obvious of these is Fulfillment by Amazon, where vendors can store their products alongside Amazon's own products and use the company's logistics services for one- and two-day delivery. However, this also includes Amazon's own advertising services, which was one of the fastest-growing segments across Amazon's portfolio in 2018. As it pertains to Prime Day, Amazon is planning new collaborations with several new key apparel vendors and has noted that small- and medium-sized vendors sold more than $1.5 billion worth of products on Prime Day last year, a figure that we expect the company to easily surpass in 2019.

R.J. Hottovy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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