25iQuiz: What is the LTV of a Prime subscriber?
"Amazon said the number of items delivered under its Prime free-shipping program almost quadrupled from a year ago."
"One of the hottest buys was: Glitter Globe Doll Winter Disco Series with Glitter Hair." https://www.barrons.com/articles/amazon-stock-rallies-on-strong-holiday-sales-51577392774?refsec=technology …
Do you agree?
This LTV calculation for Amazon Prime from a few years ago is based on one set of assumptions by one analyst based on incomplete information.
ARPU: $193 a month
Gross margin 29%
Churn 0.6% (customer life 167 months or ~14 years)
Discount rate 9%
Amazon isn't understandable if you believe its business model is similar to the manufacturer you learned about in "introduction to accounting." Also: trying to value Amazon’s Prime business with a P/E ratio is like trying to open a can of corn with a pickle. Focus on cash flow.
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