One day's shipping is expensive for Amazon, but analysts say it is driving the growth of new Prime members

Amazon.com Inc.'s latest earnings show how much it costs the company to reduce Prime shipping to one day, but analysts say the e-commerce giant is already reaping the benefits.

Amazon

AMZN, -1.56%

announced in April that it cut its two-day shipping for Prime members to half at a cost of $ 800 million in the second quarter.

Amazon's finance manager Brian Olsavsky said on the second-quarter revenue call late Thursday that the total usage actually exceeded the amazing forecast.

"We saw some extra transition costs in our warehouses," he said according to a FactSet transcript. "We also saw some costs for buying more stock and moving stock in our network to get it closer to the customers. And we've built it ̵[ads1]1; not just the cost structure but an accelerating cost penalty – into our third quarter guidance that was released with our revenue today. "

See: Amazon's record of record revenues comes to an end, and the stock drops

The amount spent is ticking, but analysts say the benefits are too. Amazon's profits did not record, but Neil Saunders, CEO of GlobalData Retail, noted that product sales grew to $ 35.86 billion from $ 31.86 billion.

"Some of the growth has been driven by the transition to a day's delivery for Prime," he said in a note. "Our data shows that this has been popular, and Amazon has picked up some new Prime members as a result and has caught a greater share of those shoppers looking at convenience or needing a product in a hurry."

"In our view, none of these constituencies is temporary, so Amazon has effectively succeeded in increasing its long-term market share," he added.

Saunders believes Amazon will compensate the extra shipping cost with greater automation through the supply chain and more internal fulfillment. [19659002] Still competitors like Walmart Inc.

WMT, + 0.71%

and Target Corp.

TGT, -1.03%

has made advances in e-commerce, keeping Amazon on its toes and removing core customers, Saunders said.

Read: Amazon's transition to a one-day shipment shows that competition is about to overtake

“Although the company still has a clear advantage in having a wide range of low prices , it is less successful in providing satisfaction for surfing or site engagement, ”Saunders said. “This means that it performs less well in discretionary categories such as clothing. In the medium term, this is an area that Amazon needs to focus on to maintain and build its share. "

SunTrust Robinson Humphrey analysts" were pleasantly surprised "by the" immediate impact "of a day's shipping, and also believe Amazon will adapt to cost effectiveness over time.

They also see strength in other parts of the business. Amazon Web Services, its on-demand ski platform, remains robust from 40% to 37%. And advertising becomes a bigger money producer. It is reported as part of the category "other" in the income release, which also increased by 37% over the year.

"Although management would not quantify the exact growth of the ad, we believe that advertising is growing faster than the reported figures," analysts said. "The key focus areas of the company currently include improvement of relevance, international adoption, and video advertising, and we believe the growth rate can accelerate with such a great opportunity going forward. "

SunTrust Course Amazon shares buy with a $ 2,200 price target, down from $ 2,250.

Don't miss: 5 retail investments "Paying Big in the Amazon Age"

"We support the company's investments in faster shipping, AWS, advertising services, and international, which we expect to sustain over the next several quarters," wrote Stifel analysts. it is possible for Amazon to extend the convenience gap to peers. "

Analysts led by Scott Devitt note that sales were driven by online sales, which had a sequential acceleration of 400 basis. Amazon stock price Amazon share purchase with a price target of $ 2300.

Just as JPMorgan expected, the focus on Amazon has shifted back to revenue, but the acceleration and investment are bigger than analysts expected.

"think investors will prefer balance of profit growth and we like how Amazon continues to raise the line in online retail," analysts said.

And: Analysts believe VF Corps The latest addition to The North Face may be an important outerwear innovation

JPMorgan is considering Amazon overweight and raised its price target to $ 2300 from $ 2200

The Amazon share has so far this year 29.3%, while the S&P 500 index

SPX, + 0.74%

is up nearly 20.8% for the period.