Amazon soars after announcing Prime price hike, topping operating income expectations

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Amazon (NASDAQ:AMZN) soared in after-hours trading smashing operating income and EPS expectations with its Q4 report and announcing a new price hike for the Prime annual membership to $139. The price hike will go into effect on March 25.

Total revenue in North America in Q4 was $75.4B vs. $82.4B a year ago, while international revenue was $37.5B vs. $37.7M a year ago.

AWS revenue came in at $17.78B vs. $17.23B consensus and $12.7B a year ago.

Operating income was reported at $3.5B vs. $6.9B a year ago and $2.4B consensus. Operating margin was 2.5% of sales vs. 5.5% a year ago and 1.8% consensus. The company's net income tally included a pre-tax valuation gain of $11.8B in non-operating income from investment in Rivian Automotive.

Free cash flow decreased to an outflow of $9.1B for the trailing twelve months, compared an inflow of $412.0B for the trailing twelve months a year ago.

"As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic," said CEO Andy Jassy.

Looking ahead, Amazon expects Q1 revenue of $112B to $117B vs. $121B consensus and operating income of $3.0B to $6.0B vs. $6.35B consensus.

The Amazon (AMZN) conference call is set for 5:30 p.m.

Shares of Amazon (AMZN) gained 13.16% in after-hours trading to land at $3,143,85. AMZN was down 7.6% during the regular session.

Late yesterday, Amazon (AMZN) confirmed stakes in Rivian, Aurora Innovation, Air Transport Services and Vital Farms.

Comments

[FXMT]

Let's go AMZN. $4000 is one push away. With some help from options short, it should come faster than we think. Then we can test $3000 lol

[bulkrzzz]

boy.....is BABA undervalued......

[Adambombfx]

Key takes from the AMZN Conference Call

Online Stores: $66.075 billion (+1% YoY) vs. $65.989 billion expected.

Physical Stores: $4.688 billion (+16% YoY) vs. $4.384 billion expected.

Third-Party Seller Services: $30.32 billion (+12% YoY) vs. $31.0 billion expected

Subscription Services: $8.123 billion (+16% YoY) vs. $8.403 billion expected.

Amazon Web Services: $17.78 billion (+40%) vs. $17.479 billion expected.

Advertising Services: $9.716 billion (+33% YoY).

Other: $710 million (+19% YoY).

Regarding the Advertising and Other results, understand that this is the first time that Amazon has broken out its advertising results. As a result, their is not a consensus expectations number. However, the Street was looking for a combined result of $10.419 billion, which signals to me that advertising was largely in line with expectations

Regarding AWS, on the call, management called out that the platform added more revenue this quarter than any in its history. As for profitability, AWS operating income came in at $5.293 billion in fourth quarter, outpacing expectations of $4.933 billion as the operating margin expanded to about 29.8%, a roughly 180bps increase versus the year ago period.

Anyone that thinks this QTR was disappointing, is frankly insane !

TO report what they did up against the Omicron Variant and all the added cap ex dollars invested in transportation logistics because of it, is superb.....

Just think, when they no longer need to spend all the extra dollars, AMZN will be a $4,200 stock.

AMZN LONG !!!!

[MillionsDollarMan]

@Adambombfx Amazon spend is only helping it grow for the future. They are paying there people well and it will show up with better results. Big Capex spend is driving future growth. They are shifting away from third party shippers with there increasing transportation investments. Market was fearful of a hurtful quarter and was pleasantly surprised. Never doubt Amazon.

[my_symphony2003]

@Adambombfx richly valued, I say under this environment it has more downside to go than upside.

[FXMT]

@my_symphony2003 When the going gets tough, other companies will look risky and money will pile into companies like amzn, wmt...etc.

Richly valued but less risky in the investing environment coming our way.

[Dives in Aeternum]

So we have operating income literally cut in half QoQ. The only reason net income is higher is because of, "Fourth quarter 2021 net income includes a pre-tax valuation gain of $11.8 billion...in Rivian" Without Rivian, this was a weak quarter. Perhaps the jump was due to the increase in Prime membership, but that should only offset around two years of inflation at its current rate. I'm not saying Amazon is a bad stock, but it's hard to see this company growing profits (not revenue) meaningfully enough over the next year to merit the current valuation.

[ithinking]

@Dives in Aeternum the pre-tax gain of $11.8B is calculated on the price of RIVN at 12/31, which is $104. Yesterday, RIVN is at $60. If RIVN stays the same till the end of this quarter, Amazon's so called "income" will be cut 40%.

[Dives in Aeternum]

@ithinking Yeah, I think that would be an optimistic scenario. Short 200 shares of RIVN. I have trouble figuring out how it has a market cap 10B larger than Honda.

[rambler1]

Prime up 17%. Does that count for inflation? Just wondering.

[MillionsDollarMan]

@rambler1 it’s .055 per day increase. Spare change pays for it.

[JackWolf]

@MillionsDollarMan Yea, but when it comes as Bezos needs to take down a bridge to allow his super yacht to sail to open water, our house is considering getting rid of Prime. We can find all our stuff in town now that we're boosted. And we boost our local economy where we live as well.

[Solojif1]

Letting my prime expire. B rated movies at best, haven’t had any item arrive in 2 days in over a year. To top it all off. The algorithm generally INCREASES the price on a majority of items I like.
Inflation, employee compensation and supply chain issues will come home to roost for amazon in the next few quarters.

[MillionsDollarMan]

@Solojif1 I don’t believe you will for only .055 cents more each day. Best value by far.

[MillionsDollarMan]

@Solojif1 Amazon handle all those hand winds with flying colors. That’s why Amazon had the biggest market cap gain in history.

[cdgingrich]

I guess we went from FAANG to AAG.

[Florian Steinberg]

So, will the 13% bump hold today? I wouldn't bet on it...

[GR Value]

@Florian Steinberg Who knows but I highly doubt 3k would hold forever, as I said yesterday when god knows who was buying at $3300 it's really just worth $2200 for years when you price in tons of growth already.

Apparently overnight it dipped $200 since the. You're better off trading wild 10% moves.

[caprigaurav]

@GR Value One more volatile shake should bring it down to its fair value!

[Andrew Crosby]

@GR Value AWS fair value is pretty close to $2500 so if you wanna remove e-commerce and advertising and all the other technologies they have patents on, you'd be right!!!

[$CLU]

Seeing FAANG negativity by the bucket loads: "You're all to blame for our perceived problems!"
Did you always dislike what you're told to dislike? Understand if you've been programmed to either like or dislike things by news articles claiming authority.

[Maxander10]

Raising the price of Prime Subscription clearly suggests consumers or new members to boycott Amazon for Online buying instead buy through an online portal which does not use such tactics.

[MillionsDollarMan]

@Maxander10 tactics like free shipping, video, music, NFL football, MGM library for 38 cents a day. No can compete with that.

[Maxander10]

The sharp rise in Other Income category seems really fishy & an indicative of financial shenanigan.
Amazon's other income sharply rose by to more than $11 bn.
Looks like a stock price raising stunt.

[midas_someday]

@Maxander10 that $11B is from their investment in Rivian

[vassille]

@Maxander10
This is similar to the financial engineering Jack Welsh was concocting at GE a while back. He made the numbers look good no matter what

[r Negoro]

Amazon is basically a monopoly. Will keep growing.

[Florian Steinberg]

@r Negoro I disagree. Over here in Germany, there are hundreds of other online shops that you can buy from. There is probably not a single item that is not available elsewhere. Consumers are just too lazy and keep buying from Amazon as a one stop shop.

[Andrew Crosby]

@Florian Steinberg Amazon is cheaper than regular stores and delivers directly to you... its hard to justify not using it.... saves time and money and effort for $12/month and provides ok media and music and other benefits. I save more than $12/month just from automated Amazon shipments, not counting shipping.

[Florian Steinberg]

@Andrew Crosby Same here. We are Prime members and we order a lot of stuff from amazon. I also have an Amazon credit card which gives me 3% off at Amazon. We are rarely using streaming, though.

[KirillG]

Seems like these crazy price movements with AMZN, FB, PINS, SNAP are solely the result of large options plays and short coverings. Or maybe the last phase of a bubble where nothing makes sense? I wonder what happens in a couple of months with rates going up.

[montereymd]

Lol. Americans get screwed again. Jacked up prime membership only applies in US. Prime membership in Canada remains at C$79 a year . That lousy Canadian $ equivalent to US$50 a year !!

[GRLong]

@montereymd Prime membership is a function of one-day shipping costs and avg. frequency of use.

One-day shipping should be more expensive in the USA than anywhere in Europe or Canada.

And if I know Americans well, they are ordering useless stuff every other day.

Finally, it's a function of what users are willing to pay.
It's 50€/year in the EU. Many people would cancel at double the price.

[Florian Steinberg]

@GRLong It is not 50 Euro in the EU. I pay 8 Euro per month in Germany. So around $110 per year.

[GRLong]

@Florian Steinberg it's less if you do an annual subscription.

49€/year or 6€/month in Belgium for prime from amazon.de or amazon.fr

On the downside, some of the Prime video content is geo-locked.
Really irritating to find a good movie and having only the French or, worse, Dutch voice-over.

[Maxander10]

Amazon is worse than Facebook in terms of Earnings. It posted lower revenue than previous quarters unlike Facebook which posted increase in revenue although lower than blind analysts' expecrations.
Amazon posted drop in North America's Revenue for Q4. Amazon's North America Revenue dropped by 8.5% in Q4 2021 vs Q4 2020 which is a really big negative against my expectation of some 7% increase.

[User 2825711]

@Maxander10 "The company's net income tally included a pre-tax valuation gain of $11.8B in non-operating income from investment in Rivian Automotive" was the difference maker

[r Negoro]

@Maxander10 it’S a monopoly. Thats the difference.

[Angstfrei]

Don’t understand the post market euphoria. The core business is slowing down and increasing costs. Would have expected a reaction as on Netflix and Meta….

[Trade17]

@IgelBallization if AMZN reported first before NFLX META sure but reactions priced way into the stock

[Philipp Stuelcken]

@IgelBallization It is just that their core business does not really matter as long as AWS and Advertinsing can show growth rates at 35-50%. Revenues from their high-margin businesses are about 10x more worth than ecommerce revenues. And these two segments were above expectatations, so the price increase is jusitfied.

[Selective Stocker]

@Philipp Stuelcken My concern is that Amazon is reaching a point where I wonder how long they will be able to execute better than competitors that are more focused on individual spaces.

I think what Amazon has done is amazing and I think they will compete very favorably in their spaces. However, It seems like they've been received very poorly internationally by governments and regulation.

A great company but I'm seeing some pretty amazing online growth numbers from their competitors who are turning a profit.

[Maxander10]

Ohhoohhoo North American revenue is big turn off for Amazon Investors who should use post market hours upside for exiting or sell off.
I doubt that prime price hike will help much for Amazon.

[midas_someday]

@Maxander10 there was an article in the NYT recently that included Amazon’s own data about prime membership fee hikes in the past. After every hike, the annual spend per member has gone up! Basically, members buy more to justify paying more in membership fees!

[becomjapan]

"What AWS was to developers last decade, Foundry really will be to developers this decade."

SHYAM SANKAR, COO, Palantir

finance.yahoo.com/...

$PLTR $AMZN

[FXMT]

@becomjapan pltr management is desperate. Comaring their product to aws.

[GRLong]

@becomjapan hahaha, the audacity.

From day one of AWS I was able to create a free account just with an email address and got some free credit to boot.

It was the same for gcloud, Azure and Alicloud.

And you think anyone is going to switch to a platform that requires all sorts of information just to open an account or read the documentation?

Delusional.

This looks more and more like IBM Watson.
I asked an IBM rep. how I could take a stab at it and she replied: "come to IBM offices in N.Y." !!!

[Selective Stocker]

@FXMT Well let me say this. AWS and Palantir in my mind aren't even close in terms of what they do. Amazon one day soon may in all likilihood need Palantir as they certainly won't be going to Google, Microsoft for help. IBM could be in there but if I'm Amazon I want to work with Palantir.

They need to clean up their marketplace and their businesses are becoming a bit harder to see with clarity.

I was an intern for a leading TV affiliate and corporate (A Large Publicly Traded Company mandated online growth)

GM's accross the country started funneling portions of existing revenues and price increases for existing products into growth of existing products into "new profit centers" I'm not to worried about that with AWS but the advertising increases without the overall organizational margins changing meaningfully are something ro keep an eye on.

[Willie Phister]

when it your examine the results - high costs in North America, bad results in International, and AWS grew big. And stock comp expense increase was super huge.

so i'm not feeling this on the retail side, the salad days there are slowing down.

looks like the stock is trading on AWS. just keep in mind the on-line retail stuff will be a headwind and in several years people will demand a spin off of AWS.

[dstb]

AWS was nice. The rest sucked.