Amazon’s recent acquisition of Whole Foods has analysts buzzing about what changes are likely to occur in both companies. Some are saying that Amazon’s biggest contribution, interestingly, isn’t its tech; it’s Amazon Prime.
At the moment, about 80 percent (or 38 million) U.S. Prime members don’t shop at Whole Foods. But if convenient Prime services are integrated into the Whole Foods shopping experience, analysts theorize that earnings across the board will skyrocket.
In particular, the “Prime Now” option—which involves delivering purchases within one to two hours—could lead to huge growth for both Whole Foods and Amazon.
According to Brian Nowak, an analyst at Morgan Stanley, “price cuts, Prime Now, and other investment[s] will pressure profitability, but we also see Whole Foods Market driving faster Prime sub growth.”
Certainly Prime has been Amazon’s biggest advantage when it comes to online retail. Prime customers make far more purchases and spend far more money than non-Prime customers, for starters. And with Amazon adding new services to Prime all the time, the company has quickly become the first choice retailer for 93 percent of Americans.
So it’s not surprising that Nowak predicts the integration of Prime with Whole Foods will drive one-third of the supermarket chain’s future growth. Nowak suggests that the grocer will grow its revenue at a 12 percent compound annual growth rate through 2022.
Analysts are also predicting that Amazon’s purchase of Whole Foods will boost Amazon’s other products and services. Nowak says Amazon’s Echo device sales, website traffic, and other merchandise are likely to experience similar upticks. This will be largely due to new shopper growth.
Of course, it’s worth noting, as The Street’s Jim Cramer has, that Amazon doesn’t actually release its Prime figures, which means investors can’t be certain what the service’s numbers really are or what its growth might look like.
Even without the Whole Foods acquisition, Amazon is having an amazing year. Its shares have risen 33 percent year to date versus S&P 500’s 12 percent return.
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