Wall Street analysts rave about Amazon's one-day delivery push: 'Game-changing'

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In breaking down Amazon‘s first-quarter earnings, Wall Street analysts focused on the company’s announcement that it will shorten standard delivery for Prime members to one day from two.

The move was welcomed by analysts, who pointed to one-day delivery as a way to further drive growth within Amazon’s consumer e-commerce business while simultaneously distancing the company from its competitors.

“In a potentially game-changing announcement, AMZN on the call highlighted an incremental $800MM investment in 2Q19 to roll out free one-day delivery for Prime members,” Cowen said in a note to investors.

“This IS Big News, if you believe in Shipping Elasticity, which we do. The faster you ship, the more people buy. … This could be a key growth catalyst for Amazon for some time,” RBC Capital Markets said.

“We believe the move is consistent with AMZN’s long-standing goal of convenience & selection, but also likely reflects the increasingly competitive retail environment. … We come away with more confidence in Amazon’s ability to stabilize & potentially accelerate revenue growth,” J.P. Morgan said.

Amazon shares traded 1% higher in Friday’s premarket from Thursday’s close of $1,924 a share. Amazon’s earnings after the close topped expectations.

Read what major analysts were saying about one-day Prime delivery:

“In a potentially game-changing announcement, AMZN on the call highlighted an incremental $800MM investment in 2Q19 to roll out free one-day delivery for Prime members on ~100MM items that have historically been available for free 2-day delivery. Mgmt. emphasized the rollout will be a multiquarter effort to expand footprint in the US, with global expansion to come later (though we note select markets such as UK, Germany, and France already have a free one-day offering on some items, and we expect them to expand selection over time). The company noted it expects increased conversion and stickiness of the Prime offering as consumers become accustomed to free one day, and mgmt. also underscored that prior fulfillment and infrastructure investments (as well as some testing of one-day) should allow them to dial up most of the US footprint by the end of ’19”

“We like that the spend is success based, but we also expect the $800M to ramp in 3Q/4Q as AMZN expands 1-day selection and geographic reach. We believe the move is consistent with AMZN’s long-standing goal of convenience & selection, but also likely reflects the increasingly competitive retail environment … we come away with more
confidence in Amazon’s ability to stabilize & potentially accelerate revenue growth, and more clarity on AMZN’s 2019 investment spend with Prime 1- day shipping.”

“We think the move to 1-day Prime delivery – on top of wage increases in November – will help further separate Amazon from competitors, driving more Prime subscriptions, expanding the TAM and widening the company’s competitive advantages. The company’s history with faster shipping shows that while it weighs on unit economics, it can make up for lower profit contribution per order with an overall increase in orders, driving more contribution per Prime member.”

“We see AMZN’s 1-day Prime shipping raising consumer expectations and increasing the cost to compete in ecommerce … Just as AMZN did with Prime 2-day delivery 14 years ago, we see a broad-based 1-day shipping offering increasing consumer e-commerce expectations (essentially more people will get used to 1 day vs 2 day shipping… and grow to expect 1-day shipping). This, in our view, is likely to cause other brands, manufacturers, retailers, and logistics companies to have to invest more aggressively to compete with Amazon and its differentiated delivery. The cost to compete within e-commerce continues to rise.”

“1-Day Prime may be Amazon’s Trojan Horse to build its third party logistics network … we believe Amazon ground and Air logistics offerings are large and cost-effective enough vs. existing logistics players to become real logistics competitors … cost-effective enough vs. existing logistics players to become real logistics competitors.”

“This IS Big News, if you believe in Shipping Elasticity, which we do. The faster you ship, the more people buy … This could be a key growth catalyst for Amazon for some time.”

“Most interesting was the announcement of free 1-Day Prime as an initiative that will stimulate revs & units (as early as Q2) but could remain an area of investment thru 2019 (~$800m headwind embedded in Q2 OI guide). Our initial read is that there are key questions that will remain on the long-term economic return of 1 Day prime (that investors will examine future operating performance impacts for answers).

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