CNBC’s Jim Cramer is convinced that the move by Amazon to increase its Prime membership price is a sign of strength that should attract investors. The “Mad Money” host said on Friday that the price hike, which seems to bother no one, is the clearest sign that the stock is a buy. Under normal circumstances when a company increases the cost of its products or services it’s a point of concern to investors. For the case of Amazon it’s different because the price change is not going to affect its business in any significant way.
Amazon increased the price of Prime membership from $10.99 to $12.99, an 18 percent increment. According to Cramer, this is like a tax on people who prefer to pay monthly since the annual membership rate will remain at $99 while those who use the monthly plan will end up paying $156 a year.
Cramer added that the quality and value that Prime members receive is so high that the price hike will get zero resistance and most customers won’t even notice the change. He pointed at Netflix, which increased the price of its 4K plan to $13.99 a month and kept adding on subscribers based solely on the quality content that is available on the platform.
He gave other examples of companies that increase the cost of their offerings and nobody cares much. These include Costco and Apple. Costco has some of the largest bargains in the marketplace which attract loads of consumers. A rise in the price of its membership cards has never had any effect on customer loyalty. Apple’s cloud service has also experienced the same trend.
Cramer predicted that Spotify, the music app that is currently privately held has the potential to be in the same class. He noted that the quality offered means that if the company ever went public, many won’t mind a price hike on their offerings. The “Mad Money” host wrapped up by advising investors that if a company increases prices and it doesn’t bother them, then they should snap up that stock instantly.