Morgan Stanley Believes Amazon Could be Sitting on Another $3.5 Billion Business

Morgan Stanley believes Amazon's Buy with Prime service could be another winner.

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With Amazon Web Services, the company has morphed from an online bookseller to an e-commerce giant. Using its new Buy with Prime program, Prime members can check out using their Amazon account when they purchase from another retailer's website.

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For Amazon, the service could generate billions of dollars.

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He estimated that Amazon would earn $1 billion more in annual earnings before interest and taxes, or EBIT, in 2025 if 2% of non-Amazon.com packages switched to Buy with Prime. EBITDA of $3.5 billion could be generated by 5% of non-Amazon volume, according to his bull case.

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Shopify is directly competing with Amazon's new service

A warning was issued by Shopify in September that sellers using Buy with Prime would be in violation of its terms and conditions.

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According to Nowak, Amazon has a competitive advantage.

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“With Prime shipping, you get the best price and the fastest delivery compared to competitors,” he said. In terms of price, Amazon and Shop are in rough agreement (usually $8) although Amazon offers 1-2 day shipping while Shop offers 2-3 day shipping.

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Buyers also have the option of shipping themselves through delivery services such as UPS and FedEx, but this option is generally more expensive, Nowak explained.

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The quarterly earnings report for Amazon will be released on Thursday. In this year's first quarter, its shares have risen more than 21%.