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Amazon's record-breaking holiday season includes two killer stats but its stock has surprisingly lagged

It may be time for a post-Christmas sanity check for investors on Amazon’s surprisingly lagging stock.

While Amazon touted a “record-breaking” holiday shopping season in a post Christmas Day press release, it’s really two stats from the highlight reel that should question why Amazon’s stock (AMZN) has been stuck in neutral at all.

First, Amazon said 5 million new customers started Prime free trials or began paid memberships worldwide. Let’s assume that all 5 million of those customers end up being paid Prime members — that’s $595 million in annual run rate recurring sales assuming the service’s $119 annual fee. Not too shabby of a recurring revenue stream, which could go on to be higher as Prime members spend throughout the Amazon ecosystem. It could also help Amazon easily fund its ambitious new investments in same-day delivery and dare we day, electric autos (see recent Rivian investment).

Want to be more pessimistic on Prime’s future sales contribution? That’s fine — but even 5 million free trials are likely to unleash a wave of consumer spending on Amazon’s platform in the first half of 2020. What other retailer could say that? Competitive advantage in its finest form.

Cost of fast deliveries

As for the second eye-opening stat, Amazon highlighted the number of items delivered via Prime one-day and free-same day delivery quadrupled versus last holiday season. A component of that improvement is no doubt because Amazon is offering these speedier delivery services in more locations year-over-year. But it also goes a long way to validating Amazon’s outsize $1.5 billion fourth quarter investment in expanded same-day delivery. Amazon looks to be building a major shipping competitive advantage, and its customers appreciate it for doing so.

So, those out there questioning the spending on getting faster deliveries, you may want to reconsider. The delivery figures further suggest that Amazon rivals Walmart and Target aren’t completely derailing Amazon’s business model amid their own push into speedier services.

FILE- In this Feb. 9, 2018, file photo, a box for an Amazon prime customer moves through the new Amazon Fulfillment Center in Sacramento, Calif. President Donald Trump took another shot at Amazon.com on Thursday, March 29, tweeting that the online retailer pays “little or no taxes” and that it uses the U.S. Post Service as a “Delivery Boy.” (AP Photo/Rich Pedroncelli)
(AP Photo/Rich Pedroncelli)

That thesis alone has weighed on Amazon’s stock, experts tell Yahoo Finance. Obviously the other element to Amazon’s stock weakness could be boiled down to fears of a government break-up and increased investment in faster shipping.

Indeed it has been bizarre to see Amazon’s stock underperform the S&P 500, Dow Jones Industrial Average and Nasdaq Composite since late September. All three of the major stock indices have melted up heading into 2020 — Amazon’s stock has largely flat-lined.

But given Amazon’s holiday season performance, that trend could be poised to reverse in early 2020. Thank you Prime and same-day delivery.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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