Analyst: Prime Day 'Locks In' Customers For Amazon's Ecosystem

Worldwide sellers taking part in, Inc. AMZN's annual Prime Day saw the biggest 24-hour sales day in Amazon history, the e-commerce platform said in a press release.

Members in the U.S. saved hundreds of millions of dollars on items for sale, and there is still plenty of time left to catch a good deal.

Prime Day Part Of A 'Bigger Story'

Amazon's Prime Day event will likely generate incremental sales, but the sales event is part of a "bigger story," Daniel Flax, senior research analyst at Neuberger Berman, said during a Monday CNBC interview.

Prime Day is part of Amazon's push to advertise the "extension and expansion" of Prime membership, which is now expanding to include Alexa technology on more third-party devices, the analyst said. 

The emphasis on why a Prime membership is valuable for consumers will be vital toward growing shareholder value over the coming years, he said.

Locking In Customers For Life

Amazon's recent earnings report showed a slowdown in growth, which places an emphasis on maximizing the "lifetime value" of a customer, Michael Graham, senior equity analyst at Canaccord Genuity, also told CNBC.

Prime Day is a tool to not only "lock-in" customers to Amazon's membership ecosystem, but to "elongate the relationship they have with each individual customer," the analyst said. 

Loop Capital: $2,380 PT Based On 'Existing' Business

Loop Capital Anthony Chukumba separately told CNBC that his $2,380 price target on Amazon's stock is based on its "existing business."

Amazon has plenty of room to not only expand into new markets, but to "disrupt" these markets in the U.S. and internationally, the analyst said. 

Among the few markets Amazon has room to expand in is health care, given its already announced partnership with Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B), he said. 

The company's streaming video business is backed by multiple A-list celebrities, and the company has a potential fantasy series in the pipeline that could rival "Game of Thrones" in popularity, Chukumba said. 

The core Prime benefit of two-day delivery — which will soon be lowered to one day — is Amazon's most notable driver of membership growth, he said. 

What The Options Market Is Saying

Coinciding with day one of Prime Day, options expert Mike Khouw said he noticed that put volume in the retail ETF SPDR S&P Retail XRT outpaced call volume by a factor of 5-to-1.

A buyer acquired 1,400 September 42-puts for $1, Khouw said during CNBC's "Fast Money" segment Monday.

This move is profitable if the ETF falls by at least 5% prior to the September expiration, he said. 

Options on the retail ETF are also trading near three-year lows in terms of 17.4 implied volatility versus lows of around 16.5, Khouw said. 

Price Action

Amazon shares were down 0.22% at $2,016.50 at the time of publication Tuesday. 

Related Links:

Amazon Prime Day 2019: What The Pros Are Saying

Some Of The Best Amazon Prime Day Deals Are Found Elsewhere

Photo courtesy of Amazon. 

Posted In: 52 Week HighsAmazon PrimeAnthony ChukumbaCanaccord GenuityCNBCDaniel FlaxMichael GrahamMike KhouwPrime DayAnalyst ColorNewsOptionsEventsMarketsAnalyst RatingsMedia