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Amazon.com, Inc. (NASDAQ:AMZN) subscription segment can continue to show robust growth

Amazon.com, Inc. (NASDAQ:AMZN) subscription segment can continue to show robust growth

In the latest quarterly earnings, Amazon (NASDAQ:AMZN) showed that it has built a subscription juggernaut which keeps on growing. The subscription segment had revenue of $4.34 billion. This was up from $3.1 billion in the year-ago quarter and equals 42% growth after excluding F/X. After a brief dip in the growth rate in the December quarter, the growth in this segment has again picked up. This should help in improving the bullish sentiment towards Amazon stock.

After the robust growth in the latest quarter, the trailing-12-month subscription revenue was equal to $15.5 billion. If Amazon can maintain the current growth rate, we should see this segment grow to $30 billion by the end of 2020, on an annualized basis.

Some of the analysts have pointed to increased competition in streaming as a headwind for Amazon. But Amazon is in a much better position compared to Disney (NYSE:DIS), Apple (NASDAQ:AAPL) and AT&T(NYSE: T) who will be launching their respective streaming services.

No Signs of a Slowdown from Amazon Stock

A lot of attention has been paid to Amazon’s AWS and advertising segment. However, the subscription segment has kept up with these two segments in the latest quarter. AWS had a growth rate of 42% and Others (primarily advertising) segment had a growth of 36%.

Source: Amazon Filings

The recent numbers show that there is still enough room for growth in the subscription segment. Amazon can launch new subscription perks at different price points to increase the per-user revenue.

Fig: US Prime membership growth. Source: CIRP

A couple of weeks back, CIRP reported the Prime membership base in U.S. at 103 million. This was equal to 11% YoY growth. According to the U.S. census bureau, there are approximately 125 million households in the US. Hence, Amazon is now reaching over 80% of the households.

This is a big jump from 4 years back when it was at close to 40 million mark. A bigger membership base increases the bullish case for Amazon stock due to better moat for its services.

Future Growth Drivers

Although the Prime membership base is close to saturation level in the U.S., Amazon can still grow this segment through new services. Amazon can already provide one-day delivery to 72% of U.S. population. The massive investment in fulfillment and delivery centers has helped Amazon improve its delivery game. This also opens new doors to try different services in the future and increases the growth runway for Amazon stock.

In the last quarter, there was a complete rollout of “Amazon Day” service for all U.S. Prime members. This service allows a user to get all their delivery on a single day. Hence, there are lower instances of packages getting stolen, providing better convenience to customers.

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1,912.68.

The projected lower bound is: 1,765.14.

The projected closing price is: 1,838.91.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 24.4560. This is not an overbought or oversold reading. The last signal was a buy 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 45.01. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 19 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -65. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 17 period(s) ago.

Rex Takasugi – TD Profile

AMAZON COM closed up 13.150 at 1,836.430. Volume was 29% below average (neutral) and Bollinger Bands were 0% narrower than normal.

Open High Low Close Volume___
1,832.7501,849.2671,827.3501,836.430 3,199,965

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 1,853.92 1,853.39 1,755.69
Volatility: 26 25 46
Volume: 4,050,002 4,366,224 5,644,498

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

AMAZON COM is currently 4.6% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of AMZN.O (mildly bearish). Our trend forecasting oscillators are currently bearish on AMZN.O and have had this outlook for the last 10 periods.

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