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Instant Gratification A Hit For Amazon.com With Prime Now

With the lofty goal of delivering vast swaths of his mighty e-commerce firm’s sprawling inventory within one hour, Amazon.com ( AMZN ) CEO Jeff Bezos has struck cybergold — shoppers have flocked to the latest iteration of his Amazon Prime loyalty program, Prime Now. Amazon executives have described rapid delivery as both difficult and expensive — and have acknowledged that customers love it. And Amazon loves its customers, so much that Bezos repeatedly has said the company will forego profits to please them. Cowen & Co. Tuesday released results of its survey of 1,200 Amazon Prime customers that it says shows one in four already have adopted Prime Now. It’s basically free. With order via a mobile app, Prime Now will deliver a large number of Amazon-bought goods within two hours in areas of the nation where the service is available. Customers can use the app for one-hour delivery as well, but there’s a $7.99 charge for that. Prime Now is one Amazon salvo in a multiyear campaign to snatch more of the household budget. Amazon.com stock was up more than 3.5%, near 573, in afternoon trading on the stock market today . The company carries an IBD Composite Rating of 78, where 99 is the highest. Cowen analyst John Blackledge, in the research report, says that Bezos’ approach with Prime Now complements Amazon’s same-day and two-day services, and adds more value to its grocery operations Pantry and Fresh. Wal-Mart Vs. Amazon Heating Up Wal-Mart ( WMT ) — by far the largest brick-and-mortar retailer — makes bank on its grocery business, which accounts for about half of its top line, according to ChannelAdvisor ( ECOM ) Executive Chairman Scot Wingo. But Amazon is encroaching on Wal-Mart’s business. “We view Prime Now as one of the pathways Amazon is using to gain share in the $1 trillion grocery market,” Blackledge wrote. “Our early survey work suggests the strategy is working.” The survey indicated that 70% of those responding bought goods via Prime Now multiple times a month — and about a third of shoppers bought groceries from a local store that elected to list its items on Prime Now. The service is available in 24 markets that account for nearly half of the U.S. gross domestic product, says Blackledge. Food delivery is available in seven markets. Prime Now’s success is also a blow to eBay ( EBAY ), which continues to struggle to maintain relevancy for shoppers. Plagued by problems such as a significant data breach and SEO challenges following a change in Alphabet ( GOOGL ) subsidiary Google’s search engine algorithm, eBay has been unable to match Amazon’s double-digital growth rate. Disagreeing with recent investor sentiment — eBay stock has had a choppy beginning to 2016 — Wells Fargo analyst Matt Nemer says that eBay has potential, albeit as a hedge against a potentially slowing global economy. And for its part, eBay has been making significant bets on restructuring the way it lists items. But as Amazon continues to innovate its way to riches, some say that its position as the dominant e-tailer is impenetrable . That hasn’t stopped rivals, however. Privately held Jet.com is making a stab, also offering two-day shipping, and Alibaba ( BABA )-backed ShopRunner is also taking aim at Amazon. ShopRunner executives have told IBD that the company plans to take on Amazon in categories where the Seattle-based company doesn’t have a strong foothold, such as fashion.

PayPal Venmo Stacks Up Well Vs. Apple Pay, Google’s Android Pay

Based on a survey of 1,000 PayPal ( PYPL ) customers, an analyst says that the company isn’t getting enough credit for the potential impact of its peer-to-peer payments app, Venmo. According to Jefferies analyst Jason Kupferberg, investor concerns over the  Apple ( AAPL ) Pay competitor are exaggerated — PayPal’s mobile sales continue to grow and have, in fact, accelerated since Apple released its payments app, he says in a research note. Venmo is a mobile app that enables friends and family to share expenses such as rent, meals and cab fare. Google, a unit of Alphabet ( GOOGL ), also competes in the payments game with its Android Pay. Though PayPal executives continue to emphasize the firm’s “platform agnostic” approach — it isn’t tied to an operating system or platform — and say that neither Apple nor Google is a real threat, some industry watchers disagree. Alex Rampell, a general partner at noted VC firm Andreesseen Horowitz, likened the prospects of either Apple or Google taking a bigger interest in payments to the Death Star — the planet-destroying battle station in “Star Wars” — approaching for all other rivals. “This isn’t the ‘Empire Strikes Back,’ ” Rampell has told IBD in the past. “This is the Death Star coming.” Kupferberg wrote in a research note Monday that PayPal earnings will accelerate due to transactions conducted with the Venmo app. Venmo is free for now, but PayPal executives say that they plan to monetize the app, which is popular with millennials. They say that PayPal plans to allow selected PayPal merchants to accept payment via the Venmo app — and PayPal would charge its typical transaction fee (2.9%, according to Fortune magazine) in the process. According to Kupferberg, 67% of Venmo users would use the Pay With Venmo feature one or twice a month, with 44% using it three to five times a month, and 19% using it six to 10 times per month. Kupferberg says that Pay With Venmo transactions will yield larger profit margins because Venmo customers typically fund their accounts with debit cards, bank accounts and stored balances — the result of others sending cash. PayPal stock was up more than 2%, near 38, in afternoon trading on the stock market today . The San Jose-based company has an IBD Composite Rating of 91, where 99 is the highest. The stock has had a choppy few months since its spin-off from eBay ( EBAY ) in July. It hit its high of 42.55 during its first trading session on Nasdaq and has plunged to as low as about 30 on several occasions. At least one analyst says that the sell-off has been too hasty . Kupferberg’s price target for PayPal stock is 44. PayPal has recently settled a lawsuit over a perennial issue that the company faces: locked accounts.

Google, Alphabet Could Be Big Winners From Intel-IRS Tax Dispute

Alphabet ( GOOGL ), which owns search leader Google, could collect least $3.5 billion in new tax benefits if Intel ( INTC ) succeeds in its longstanding international tax dispute with the Internal Revenue Service, according to the Wall Street Journal. The speculated amount exceeds Google’s entire 2015 tax cost, according to a report Monday by the Journal. Alphabet, Intel and the IRS all declined to comment. “If Google is $3.5 billion, there must be many other companies that have billions of dollars at stake on this issue,” Reuven Avi-Yonah, a tax law professor at the University of Michigan, told the Journal. Alphabet is “paying a huge amount of attention to this case, because this is probably the largest unresolved tax issue that high technology companies now have,” Eric Ryan, a partner at the law firm DLA Piper, told the newspaper. The broader tech industry is also watching the case, which the IRS appealed to the 9th U.S. Circuit Court of Appeals last week. At least 20 companies, including Microsoft ( MSFT ) and eBay ( EBAY ), have disclosed that they also are monitoring the outcome of the case involving share-based compensation, according to the report. The dispute has been brewing since 2003, part of a battle between the IRS and companies over what are known as cost-sharing arrangements between U.S. corporations and their low-taxed foreign subsidiaries. In its annual report, Alphabet recorded a potential $3.5 billion benefit, citing a lower court’s ruling. That was offset by a $3.5 billion deferred tax liability, meaning it didn’t result in a major one-time boost to the company’s earnings, the Wall Street Journal said. In its 10-K, Alphabet said it couldn’t take the whole tax benefit because it hasn’t decided whether it can and would put any gains, should Intel win, into its own offshore subsidiaries — keeping its money outside the reach of the U.S. The company could record the benefit after the court case concludes. Intel inherited the case from Altera, which it acquired last year. That case involved about $80 million in corporate expenses from 2004 to 2007, according to the U.S. Tax Court decision. Altera’s dispute was about whether share-based compensation — but not salaries — should be included in those costs. Altera challenged an IRS regulation stating that share-based compensation must be included in the cost-sharing pool. The IRS regulation meant that the foreign company had to pay for this and deduct the amount from its lower-taxed income, said the Journal. Alphabet stock was up a fraction in early afternoon trading in the stock market today , near 728. This month, Alphabet posted a  Q4 earnings beat , but revenue from the company’s stable of speculative, non-search-related “other bets” missed analyst expectations. Image provided by Shutterstock .