It's Prime Day! But Is It Good For Amazon's Stock?

In a report published Wednesday, Deutsche Bank analyst Ross Sandler stated that he likes the short-and-long-term trajectory for Amazon.com, Inc. AMZN as catalysts such as Wednesday's "Prime Day" sale should "add fuel" to the "already strong" Prime story.

According to Sandler, his bullish thesis assumes Prime reaching 100 million members in the out-year. As Prime Day ushers in a "big" second half of 2015, the retail business faces an easier comp (500 basis points of growth from the Kindle Fire inventory write down) which will result in further margin improvement and accelerating growth.

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Sandler said that Amazon is likely crossing the 50 million member mark for Prime as it continues to move towards becoming the largest retail membership club in the world. Prime customers represent a "huge loyal base of high-frequency shoppers" that continue benefiting from enhanced services and additional features.

Sandler also noted that his analysis suggests that Amazon continues to lose money on every Prime member, but the rate of loss is "compressing." In fact, Prime is the "biggest moat" in retail and presents half of total gross merchandise volume. The analyst also added that other retailers won't be able to catch up to Prime.

Sandler also discussed Amazon's AWS (Amazon Web Services) segment, arguing that "improved financial visibility" has unlocked value closer to his $150 per share contribution, but each calendar year flip adds another 30 percent to the cloud story.

Q2 Metrics In Focus

Looking forward to Amazon's second quarter print, Sandler is expecting the company to report a gross profit of $7.3 billion (in-line with consensus estimates), revenue of $21.9 billion (versus consensus estimates of $22.3 billion) and CSOI of $548 million (versus consensus estimate of $579 million).

Sandler is also estimating AWS revenue will re-accelerate to 60 percent year-over-year and the segment's CSOI margin will improve 900 basis points year-over-year.

Bottom line, the Amazon "story" ranks among one of the best in the consumer internet space, and while the company will enter a re-investment phase next year, upside in shares still exists.

Shares remain Buy rated with an unchanged $500 price target.

Shares traded recently at $463.81, down 0.5 percent.