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

Amazon.com 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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The article Why the Amazon Prime Rate Hike Isn't Scaring Away Consumers originally appeared on Fool.com.

David Hanson has no position in any stocks mentioned. Mark Reeth has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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