We’re a little under three weeks away from January 29, when e-commerce giant Amazon (NASDAQ:AMZN) plans to switch its streaming service users to an ad-supported tier unless they’re willing to pay extra to prevent it. But many Amazon employees won’t be around to see it, as their jobs are about to be cut. Amazon gained modestly on the news in Wednesday afternoon’s trading session.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
It’s not just Amazon Prime Video that will be cutting numbers; Amazon MGM Studios will also take a hit, as the total number will extend into the “several hundreds.” The reason? Prime Video and Amazon MGM Studios senior vice president Mike Hopkins made it reasonably clear: Prime Video had “…identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact.”
Okay, fine, but why not just move your employees to those opportunities instead of ditching them altogether? Given that Amazon spent $8.5 billion to pick up MGM and about $465 million for just the first season of “The Lord of the Rings: The Rings of Power,” that might be explanation enough.
TV Under Threat
The impact of Amazon launching an ad-supported tier is hard to understate. We know what happened when Netflix (NASDAQ:NFLX) launched its ad tier; subscriptions went up, and it likely kept some subscribers who would have otherwise left. Amazon making such a move could represent an even bigger shift thanks to Amazon’s sheer reach. After all, as the Hollywood Reporter noted, people are paying for Amazon Prime for the “fast shipping.” Things like “Reacher” and “Thursday Night Football” are just thrown in for free. Who will pay Amazon to step up their Prime Video subscription? It’s a question that a lot of anxious viewers are waiting for an answer to.
Is Amazon Stock a Buy or Sell Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 43 Buys assigned in the past three months, as indicated by the graphic below. After a 61.36% rally in its share price over the past year, the average AMZN price target of $183.58 per share implies 19.46% upside potential.
