Author Archives: Scalper1

Will High Prime Member Churn Hurt Amazon Sales?

Amazon.com ‘s ( AMZN ) Prime loyalty program is one of the keys to the company’s e-tail dominance, but the secretive Amazon reveals little about Prime’s underlying metrics, leaving analysts to generate their own. According to a recent analysis conducted by ITG Investment Research, Amazon’s churn rate — the annual rate at which shoppers stop subscribing to Prime — was 32% in Dec. of 2015, which ITG analyst Steve Weinstein called “high.” But in a research note Thursday, Weinstein wrote that even though the company has a high churn rate, customers who dropped Prime actually spent 8% more money on Amazon.com in the year following the cancellation. Amazon Prime is one of the few extremely successful loyalty programs in e-tail, a fact that surprises Wells Fargo analyst Matt Nemer. He told IBD recently that he would have expected competitors to innovate, but few have done so with success. Competitor Wal-Mart ‘s ( WMT ) Walmart.com does not have a customer loyalty program for online sales. Target ( TGT ) recently rolled out its Red Card program, which offers free shipping from Target.com, an extra 30 days for returns and 5% off all purchases. Amazon Prime affords its members free one-day shipping in certain markets, free two-day shipping in most of the continental United States, free streaming video with original award-winning content, and a host of other perks. It’s no wonder that Amazon CEO Jeff Bezos is betting big on Prime: Member spending continues to drive Amazon’s sales, too. In Q4 2015, Weinstein says that Prime members generated 57% of Amazon’s North American top line and that Prime members increase their spending about 12% annually. Older Prime members tend to spend more, and Weinstein’s analysis indicated that those members who signed up in Jan. of 2012 spent, on average, nearly 45% more on Amazon in 2015 than Prime members who joined in Jan. 2014. Non-Prime shoppers spend less than $1,000 on average in 2015. Some 33% of Prime’s 46 million members have been acquired in the last two years, Weinstein says. Amazon stock rose 2.5% to 534.10 in the stock market today . The company has an IBD Composite Rating of 75, where 99 is the highest. Seattle-based Amazon posted mixed Q4 earnings — despite hauling in more than $100 billion in sales during 2015, the company missed Wall Street’s lofty earnings target. According to Nemer, Amazon captured 51% of all U.S. retail growth in Q4. He also said that the sell-off following the earnings release was too hasty and that the company continues to have strong fundamentals and a dominant position in the market.

Garmin Races Up 17% On Strong Q4, Driven By Fitness, Outdoor

Outdoor, fitness and navigation technology company Garmin ( GRMN ) surprised Wall Street on Wednesday with better-than-expected fourth quarter results, sending its shares almost 17% higher. The Olathe, Kans.-based firm earned 74 cents a share on sales of $781 million for the quarter ended Dec. 26. Analysts polled by Thomson Reuters expected Garmin to earn 48 cents a share on sales of $760 million. On a year-over-year basis, EPS and sales were down 4% and 3%, respectively, as Garmin’s once-core automotive GPS navigation device business continues its secular decline. The company’s auto segment sales fell 21% year over year to $268 million in Q4. Garmin’s top-performing segment was fitness devices, with sales rising 14% to nearly $229 million. Garmin’s outdoor segment sales rose 6% to almost $124 million. Aviation segment sales jumped 12% to $104 million. Marine segment sales climbed 8% to $56 million. Garmin stock rose 16.6% to 41.06 on the stock market today after the company announced Q4 earnings. On a conference call with analysts, Garmin CEO Cliff Pemble said the company’s investments to diversify from personal navigation devices are paying off. Excluding the auto segment, sales grew 11% year over year. The aviation, fitness, marine and outdoor segments together contributed 66% of revenue in Q4. In the fitness device market, Garmin dominates the high-end running and sports watches segment. But it has been competing more with Fitbit ( FIT ) and others in the activity tracker business. William Blair analyst Jonathan Ho reiterated his outperform rating on Garmin stock. Garmin’s 2016 guidance was a “source of relief” for investors, Ho said. Its full-year sales target of $2.82 billion was slightly above Wall Street’s consensus. But its EPS goal of $2.25 was 5 cents below consensus. Garmin also announced plans to maintain its current quarterly dividend of 51 cents a share over the next four quarters. “These results were better than investors feared, given the global macroeconomic challenges, competition, pricing pressure and currency headwinds that the company faced,” Ho said. “We were impressed by a solidly executed quarter that led revenue and EPS to be meaningfully above expectations and a solid guide that takes into account a still-challenging environment.”