An Amazon Prime membership almost seems like a necessity these days, as both online shopping and stay-at-home entertainment viewing have picked up dramatically in popularity. Many customers view the annual fee for an Amazon Prime membership as relatively inexpensive for what they get out of it.
Yet, in spite of all the benefits an Amazon Prime membership provides, there’s no doubt that an investment in Amazon stock would have been a much better use of that money, particularly in the first year that Amazon Prime debuted.
Cost of Amazon Prime
When Amazon Prime first launched in 2005, it cost members $79 per year. The price has jumped since then: first to $99, then to $119, and now to its current price of $139.
Price of Amazon Stock
On February 2nd, 2005, the day Amazon Prime was introduced, the price of Amazon stock was $2.09. For the price of an Amazon Prime membership at the time, customers could have instead purchased about 38 shares of Amazon stock.
As mentioned above, the cost of an Amazon Prime membership has jumped from $79 to $139, a jump of about 75%. This means that today’s customers pay about 75% more than the original price of an Amazon Prime membership in 2007. But for those wise investors who instead bought Amazon stock in 2005 instead of subscribing to Amazon Prime, the results have been nothing short of incredible.
As of Sept. 5, shares of Amazon stock traded at $136. In other words, the $79 that Amazon Prime subscribers could have instead invested in Amazon stock would now be worth $5,168, representing a profit of about $5,089. If those investors had been lucky enough to sell out at Amazon’s all-time high price of $3,773.08, those shares would have been worth $143,377.04.
The Bottom Line
It’s not unusual for a stock investment to outperform a common expense. After all, expenses represent consumption, whereas investment offers the potential to generate profits over time. However, the unbelievable performance of Amazon stock over the years certainly shows that owning a portion of the company is a much wiser move than simply using its products. With $143,377 in profits, investors in Amazon stock at the start of 2005 could afford more than 1,031 years of Amazon Prime membership at the current price of $139 annually.
Of course, just like Amazon stock was a better bet than Amazon Prime membership in 2005, analysts feel that Amazon’s stock price can continue to run. Currently, analysts have a consensus “buy” rating on the stock, with an average monthly price target of $175.
While no one is suggesting that you should give up your Amazon Prime, if the analysts are correct in their predictions, adding some money to Amazon stock as well could more than pay for the cost of your annual membership.
Laura Beck contributed to the reporting for this article.
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