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Will High Prime Member Churn Hurt Amazon Sales?

Amazon.com ‘s ( AMZN ) Prime loyalty program is one of the keys to the company’s e-tail dominance, but the secretive Amazon reveals little about Prime’s underlying metrics, leaving analysts to generate their own. According to a recent analysis conducted by ITG Investment Research, Amazon’s churn rate — the annual rate at which shoppers stop subscribing to Prime — was 32% in Dec. of 2015, which ITG analyst Steve Weinstein called “high.” But in a research note Thursday, Weinstein wrote that even though the company has a high churn rate, customers who dropped Prime actually spent 8% more money on Amazon.com in the year following the cancellation. Amazon Prime is one of the few extremely successful loyalty programs in e-tail, a fact that surprises Wells Fargo analyst Matt Nemer. He told IBD recently that he would have expected competitors to innovate, but few have done so with success. Competitor Wal-Mart ‘s ( WMT ) Walmart.com does not have a customer loyalty program for online sales. Target ( TGT ) recently rolled out its Red Card program, which offers free shipping from Target.com, an extra 30 days for returns and 5% off all purchases. Amazon Prime affords its members free one-day shipping in certain markets, free two-day shipping in most of the continental United States, free streaming video with original award-winning content, and a host of other perks. It’s no wonder that Amazon CEO Jeff Bezos is betting big on Prime: Member spending continues to drive Amazon’s sales, too. In Q4 2015, Weinstein says that Prime members generated 57% of Amazon’s North American top line and that Prime members increase their spending about 12% annually. Older Prime members tend to spend more, and Weinstein’s analysis indicated that those members who signed up in Jan. of 2012 spent, on average, nearly 45% more on Amazon in 2015 than Prime members who joined in Jan. 2014. Non-Prime shoppers spend less than $1,000 on average in 2015. Some 33% of Prime’s 46 million members have been acquired in the last two years, Weinstein says. Amazon stock rose 2.5% to 534.10 in the stock market today . The company has an IBD Composite Rating of 75, where 99 is the highest. Seattle-based Amazon posted mixed Q4 earnings — despite hauling in more than $100 billion in sales during 2015, the company missed Wall Street’s lofty earnings target. According to Nemer, Amazon captured 51% of all U.S. retail growth in Q4. He also said that the sell-off following the earnings release was too hasty and that the company continues to have strong fundamentals and a dominant position in the market.

Garmin Races Up 17% On Strong Q4, Driven By Fitness, Outdoor

Outdoor, fitness and navigation technology company Garmin ( GRMN ) surprised Wall Street on Wednesday with better-than-expected fourth quarter results, sending its shares almost 17% higher. The Olathe, Kans.-based firm earned 74 cents a share on sales of $781 million for the quarter ended Dec. 26. Analysts polled by Thomson Reuters expected Garmin to earn 48 cents a share on sales of $760 million. On a year-over-year basis, EPS and sales were down 4% and 3%, respectively, as Garmin’s once-core automotive GPS navigation device business continues its secular decline. The company’s auto segment sales fell 21% year over year to $268 million in Q4. Garmin’s top-performing segment was fitness devices, with sales rising 14% to nearly $229 million. Garmin’s outdoor segment sales rose 6% to almost $124 million. Aviation segment sales jumped 12% to $104 million. Marine segment sales climbed 8% to $56 million. Garmin stock rose 16.6% to 41.06 on the stock market today after the company announced Q4 earnings. On a conference call with analysts, Garmin CEO Cliff Pemble said the company’s investments to diversify from personal navigation devices are paying off. Excluding the auto segment, sales grew 11% year over year. The aviation, fitness, marine and outdoor segments together contributed 66% of revenue in Q4. In the fitness device market, Garmin dominates the high-end running and sports watches segment. But it has been competing more with Fitbit ( FIT ) and others in the activity tracker business. William Blair analyst Jonathan Ho reiterated his outperform rating on Garmin stock. Garmin’s 2016 guidance was a “source of relief” for investors, Ho said. Its full-year sales target of $2.82 billion was slightly above Wall Street’s consensus. But its EPS goal of $2.25 was 5 cents below consensus. Garmin also announced plans to maintain its current quarterly dividend of 51 cents a share over the next four quarters. “These results were better than investors feared, given the global macroeconomic challenges, competition, pricing pressure and currency headwinds that the company faced,” Ho said. “We were impressed by a solidly executed quarter that led revenue and EPS to be meaningfully above expectations and a solid guide that takes into account a still-challenging environment.”  

SunPower Blasts Q4 Views; But Q1, 2016 Outlooks Lag Wall Street

No. 2 solar installer SunPower ( SPWR ) smashed Wall Street’s Q4 expectations late Wednesday but guided to Q1 sales that halved analyst views. SunPower stock seesawed in after-hours trading, trending up a fraction, having risen 2.2% in Wednesday’s regular session. Shares closed 2015 up 16% for the year, topping IBD’s 23-company Energy-Solar industry group, which ended the year up 1%. For Q4 ended Jan. 3, SunPower reported $1.36 billion in sales ex items and $1.73 earnings per share minus items, up 124% and 563%, respectively, vs. the year-earlier quarter. The company pulled in $900 million alone after completing its 135-megawatt Quinto commercial project in Merced County, Calif., CFO Chuck Boynton told analysts during the late Wednesday conference call. Power plants accounted for 77% of Q4 sales. Both sales and EPS ex items topped the consensus model of 16 analysts polled by Thomson Reuters for $1.27 billion and $1.52. Three months ago, SunPower guided to $1.25 billion-$1.3 billion in sales. During Q4, SunPower deployed 280 MW, down 10% vs. the year-earlier quarter but in line with its guidance for 275 MW to 305 MW. Among those deployments, SunPower counts a 100-MW project for Nevada’s NV Energy and a 36-MW project for Mexican airport Aeropuertos Del Sureste. And China remains a solar bright spot, SunPower CEO Tom Werner said on the call. Regulations and subsidies have helped China lead the world in terms of solar installations. “Demand in China remains robust,” he said. “We are committed to the Chinese market as a long-term driver of growth.” Q1 Sales Ex Items Guided To Fall 27% SunPower wrapped up the year with $2.6 billion in sales ex items and $2.17 EPS minus items, flat and up 63%, respectively, vs. 2014. That beat respective consensus views for $2.53 billion and $1.97. In November, SunPower guided to $2.5 billion to $2.55 billion in sales ex items. SunPower doesn’t give EPS guidance. The company deployed 1.15 gigawatts in 2015, touching the bottom line of its guidance for 1.15 GW to 1.18 GW. Current-quarter and 2016 views lagged the consensus. For Q1, SunPower guided to $290 million to $340 million in sales ex items, which would be down 27% at the midpoint. Wall Street expected $675.7 million in sales ex items and 33 cents EPS minus items. SunPower expects to deploy 315 MW to 340 MW in Q1, up from 266 MW in the year-earlier quarter. For the year, SunPower guided to $3.2 billion to $3.4 billion in sales minus items, missing the consensus model for $3.42 billion. Analysts expect $1.60 EPS ex items. Guidance for 1.7 GW to 2 GW deployed in 2016 would narrowly top the 2015 metric. Werner credited cost reductions, scaling and innovations, and regulatory support for “a landmark year” for the solar market in 2015. In late December, Congress voted in a five-year extension to the Investment Tax Credit on solar energy. The ITC was originally set to expire Dec. 31, 2016, prompting a 2017 “cliff” in installations. Also in 2015, Obama unveiled his Clean Power Plan with the goal of reducing carbon emissions by power plants, and 196 countries pledged to cut carbon emissions during a Paris climate summit. To capture share, SunPower is planning to heighten investments in the U.S., where solar is expected to account for only 3% of total power generation by 2020, Werner said. “We expect the five-year (ITC) extension should drive acceleration through 2020,” he said. “The scale of demand in the U.S. is huge, and we are planning to increase our spending here in the near term.” Canadian Solar Tops Views First Solar ( FSLR ) leads SunPower as the No. 1 solar company, with a $6.4 billion market cap to SunPower’s $3.2 billion. Together, the two formed yield company 8point3 Energy Partners ( CAFD ) last August. Canadian Solar ‘s ( CSIQ ) late Tuesday preannounced some results, posting Q4 sales and total solar module shipments that busted Wall Street expectations, FBR analyst Carter Driscoll wrote in a research report. Canadian Solar expects to report $1.02 billion to $1.07 billion in Q4 sales vs. analyst forecasts for $930 million to $980 million, Driscoll wrote. The company also upped its Q4 shipments guide to 1.35 GW to 1.4 GW, up 4% at the midpoint vs. earlier views. For 2016, Canadian Solar sees total shipments hitting 4.63 GW to 4.68 GW vs. prior expectations for 4.15 GW to 4.2 GW, and $3.35 billion to $3.4 billion in sales. Earlier views were for $3.28 billion to $3.33 billion. Canadian Solar stock jumped 18% Tuesday on that news, but they fell a fraction Wednesday.