Why the Amazon Prime Rate Hike Isn't Scaring Away Consumers

Amazon.com (NASDAQ: AMZN  ) announced today that it is increasing the price of its Amazon Prime service, from $79 to $99. On Thursday's Stock of the Day, host Mark Reeth and Motley Fool analyst David Hanson take a look at the reaction to this move, which David says has largely been this: Customers aren't thrilled, but they won't be canceling service.

The guys also point out that rather than this being a move of necessity, where the company is reacting to pressure from Wall Street to turn a profit for shareholders, David sees this much more as a move from a position of power. Amazon, like any good business, has the brand strength to increase prices without scaring off customers, and it's taking advantage of that pricing power.

So, is Amazon a buy today? Amazon's valuation is a notoriously difficult one to understand considering its massive growth but tight margins and lack of a profit, but David does see the move today as an incremental positive for the company, which should bring in more cash quickly that can be allocated toward even more growth in the future.

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