Amazon’s Prime subscription business is expected to more than double in the next 10 years, hitting 275 million subscribers in the U.S. alone, according to estimates by Citigroup.
CNBC, citing Citigroup analysts, reported that the Wall Street firm argued in a research report – in which it raised its price target on the stock – that the rest of Wall Street doesn’t appreciate the full value of Prime, and that the company could enjoy more than $500 billion in Prime gross sales each year within a decade.
“We remain positive on Amazon shares, and view Amazon‘s large and growing global Prime member base as not only a source of recurring revenue, but a key reason why brands and third-party sellers are increasingly relying on Amazon’s marketplace,” Citi Analyst Mark May wrote in a note covered by CNBC. The analyst said he expects shares of Amazon to rally 15 percent to $2,250 during the next year. Citigroup had a previous price target of $2,100 on Amazon.
In the case of Prime, May thinks Amazon will end the year with 101 million paid subscribers, which is close to Netflix‘s subscriber base of 117 million. The analyst predicted that Amazon Prime subscriptions will hit 275 million by 2029 and that about 80 percent of all U.S. households will use the service.
“Prime has been a tremendous success,” May wrote in the research report covered by CNBC. “Prime members are growing 35 percent to 40 percent per annum. There are many benefits of having highly satisfied membership-based customers, but a simple metric is that most studies suggest Prime members spend twice as much as non-Prime members.”
Another opportunity for the Seattle, Washington-based eCommerce giant: international Prime customers. According to the Citigroup analyst, Prime customers outside the U.S. are just starting to warm up to the service, with overseas customers spending $35 to $40 a month, compared to $120 each month for Prime customers in the U.S.