Dive Brief:

• Amazon’s e-commerce market share is on pace to rise from 34% to 50% by 2021, according to a note released Monday by investment banking and asset management firm Needham. By contrast, Wal-Mart’s share is 5%, according to CNBC.

• Needham analysts upgraded their rating on Amazon shares from hold to buy and set a price target of $1,100, according to Fortune magazine. "We believe Amazon's established dominance in the U.S. is sustainable with Prime [subscriber services], mobile penetration and third-party growth," Needham analyst Kerry Rice wrote in the note.

• The Amazon Web Services cloud computing unit also will continue to drive profits, according to CNBC’s account.

Dive Insight:

Amazon’s efforts to make Prime attractive to shoppers are seemingly neverending, and now encompass free two-day shipping on many items, same-day delivery in many areas and perks like streaming video, music, photo storage, and other bonuses. In his annual letter to shareholders last year, Amazon founder and CEO Jeff Bezos put it this way: “We want Prime to be such a good value, you’d be irresponsible not to be a member.”

Estimating Prime membership numbers has been an analyst guessing game for years, and Amazon has stayed silent on the subject. But a 10-K filing with the Securities and Exchange Commission earlier this year revealed that sales of the company's retail subscription services (including worldwide annual and monthly Prime fees as well as audiobook, e-book, digital video, digital music and other subscription services) reached $6.4 billion last year, up from $4.45 billion in 2015 and $2.8 billion in 2014. Net sales from the e-commerce giant’s retail third-party marketplace, including commissions, related fulfillment and shipping fees, and other third-party seller services, reached $23 billion last year, rising from $16.1 billion in 2015 and $11.7 billion in 2014. In addition, net sales of “retail products,” which Amazon says includes product sales and digital media content sold on a transactional basis, reached $91.4 billion in 2016 compared to $77.9 billion in 2015 and $68.5 billion in 2014.

Based on data in this latest 10-K filing and operating under the assumption that Prime services revenue accounts for 90% of Amazon's retail services subscription revenue, Morgan Stanley analyst Brian Nowak estimates there are now 65 million Prime members worldwide, according to an earlier Business Insider report. TechCrunch calculates the number could be closer to 70 million, in light of Amazon’s recent Prime push into Asia, adding that retail subscription revenue from Prime could in fact top 90%.

More than half of Amazon shoppers across the U.S. have signed up for Prime membership, according to estimates from Consumer Intelligence Research Partners released last year. Prime membership in the U.S. increased to 63 million by the end of June, up from 44 million at the same time in the previous year, representing 52% of Amazon's total American customer base, CIRP added. 

Prime membership is growing fastest among wealthier households: More than 70% of households with annual incomes topping $112,000 have a Prime membership, according to Deutsche Bank. In addition, 75% of Prime members convert when visiting the Amazon website, compared to 13% of non-Prime members, Millward Brown Digital estimates in a mid-2015 study. Prime members also buy from Amazon more than three times each month on average, compared with two times a month for non-members, and bring the company 80% higher profit than non-subscribers, according to Cowen & Co. analyst John Blackledge.

Despite the small wedge that non-Prime sales appear to represent, Wal-Mart seems to believe that there’s plenty of room there to compete. In January Wal-Mart ended its Amazon Prime-like ShippingPass membership program, which gave members free two-day shipping on most orders for a $49 annual fee. In its place, Wal-Mart now offers free two-day shipping to all customers purchasing orders over $35 (down from its previous $50 threshold), while shipping to stores will be free on eligible orders. Keith Anderson, vice president of strategy and insight at e-commerce analytics firm Profitero, compares Wal-Mart philosophy to catering to cable television customers who would rather pay ala carte than purchase a slew of channels they don’t want.

But Amazon is fighting back on that front, too: The company lowered its own non-Prime shipping minimum back down to $35 after Wal-Mart's move. More recently, Amazon announced a new service catering to people who can’t or choose not to use credit cards or bank accounts, generally a large part of Wal-Mart's customer base. In contrast to increasingly popular prepaid credit cards, Amazon Cash carries no fees.