Amazon's net sales in the fourth quarter were $137.4 billion, and net sales in the first quarter are expected to be $112 billion to $117 billion, both lower than analysts' expectations; affected by Rivian's return on investment, fourth-quarter operating profit was $3.5 billion, up 98% year-on-year, and the profit margin was 2.5%. In addition, in response to rising cost pressures, PRIME members in the United States will increase the price from $119 to $139. Amazon gave investors confidence in the future growth recovery, making Amazon's U.S. stock rise more than 18% after hours.
After the hours on Thursday, February 3, 2021, e-commerce giant Amazon announced its fourth quarter financial report ending December 31, 2021 and the first quarter of 2022 performance guidance, although sales and performance guidance were both slightly lower than market expectations, but Amazon gave investors enough confidence to let the market believe that future growth will recover; at the same time, its 9% net revenue growth also showed that it overcame a "very challenging operating environment" in the fourth quarter with its good management, multiple reasons made Amazon's after-hours increase from 0.2% At one point, it expanded to more than 20%, driving the Nasdaq to rise 2% after 100 sessions. If the stock sustains that rally on Friday, it would be the biggest one-day gain since 2009.
Amazon, the top tech company with the smallest share price gain last year, has gained just 2.4 percent in 2021; it closed down nearly 8 percent on Thursday at $2,776.91, compared with an 18 percent drop year-to-date, trailing the S&P 500's decline of about 7 percent over the same period.
Affected by the peak holiday season in the fourth quarter, in the face of many cost pressures such as supply chain disruptions and labor shortages, Amazon handed over a mixed "report card" for the fourth quarter:
The EPS for the fourth quarter was $27.75, well above analysts' previous expectations of $3.77.
Fourth-quarter net sales of $137.4 billion, slightly below analysts' expectations of $137.82 billion, up 9.4% year-over-year. Among them, AWS net sales of $17.78 billion, analysts expect $17.23 billion; advertising services reached $9.7 billion; online store net sales of $66.08 billion, down 0.6% year-on-year, lower than expected $66.44 billion.
Fourth-quarter operating profit of $3.5 billion, higher than analysts' expectations of $2.43 billion, was primarily driven by Rivian's return on investment.
Fourth-quarter operating margin was 2.5 percent, higher than analyst expectations of 1.82 percent.
At the same time, Amazon also released the "slightly weak" first quarter performance guidance for fiscal 2022 and announced an increase in prime membership prices:
Net sales in the first quarter are expected to be $112-117 billion, and analysts expect $120.51 billion.
Revenue is expected to be between $0 billion and $3 billion in the first quarter, also well below the $7.44 billion forecast.
Announced that Prime USA Annual membership will increase in price to $139/year starting February 18 this year, previously $119/year (existing Prime members will apply on the next renewal date after March 25); the monthly membership price will increase from $12.99 to $14.99.
CEO Andy Jassy commented on the quarter's performance, saying:
As expected in the holiday season, we are seeing rising costs due to labor supply shortages and inflationary pressures as the Aumechjong variant will continue into the first quarter. Despite these short-term challenges, there is still optimism and excitement about the business as we move out of the pandemic.
We optimized and expanded our logistics warehousing network to deliver faster to more customers; the AWS Cloud business grew 40% year-over-year (now at a revenue run rate of $71 billion); added iconic new entertainment titles like The Lord of the Rings, and a host of new features we've built in areas like Alexa, Ring, Grocery, Pharmacy, Amazon Care, Kuiper, and Zoox in the coming months and years, There is a lot to look forward to.
Bullish on continued growth in cloud computing and advertising, with an average wall street price target of $4,100
Amazon's cloud business, AWS, reported net sales of $16.11 billion in the third quarter of 2021, higher than analysts had previously expected at $15.40 billion; continued its strong growth in the quarter, with AWS net sales of $17.78 billion and analysts expecting $17.23 billion. From the perspective of the growth rate of cloud business, the year-on-year growth rate of 40% in the fourth quarter continued to continue the strong growth rate of 39% in the third quarter.
In the future, Amazon's cloud business will also target new business opportunities in 5G. Amazon previously announced the new service Amazon Private 5G at the re:Invent conference, saying that it can simplify the complexity of deploying the private network, enterprises only need to decide the region and network bandwidth to deploy the 5G private network, and then Amazon Cloud Technology provides the necessary 5G private network components, including small base stations, 5G core network and software, SIM cards, etc., which can be deployed in a few days.
Meanwhile, Amazon disclosed for the first time the revenue of its fast-growing advertising business. During the quarter, advertising services increased 32% year-over-year to $9.7 billion. Amazon's advertising business now ranks third in the U.S. market, behind Google and Facebook, with Google's ad revenue of $61.2 billion in the fourth quarter, while Facebook's ad sales were $32.6 billion during that period.
A number of Wall Street institutions are optimistic about Amazon's trend in the second half of 2022, attributing the continued pull effect of cloud business and advertising business, 59 analysts tracked by Bloomberg have a buy rating on Amazon, with an average price target of $4,100 per share. As of Thursday's close, U.S. stocks were trading at about $2,776.
Jeffery's report this week said that "Amazon's performance in the second half of 2022 will be good", and Jeffery gave Amazon shares a "buy" rating with a price target of $4,000:
This is due to its loose portfolio, increased visibility into cost budgets, slower capacity construction, and continued growth in its high-margin business (AWS/Advertising business).
Bank of America analysts similarly said they would "continue to be bullish on Amazon as our top FANG stock for 2022":
The first quarter will be the low point of its growth and annual margins, but the trend will improve. We think Amazon's share of e-commerce will strengthen, and at the same time it will benefit greatly from the cloud computing industry.
Costs soared, profits came under pressure, and Prime members ushered in price increases
Amazon CEO Andy Jassy previously said the company would bear "billions of dollars" in the consumer business in the fourth quarter due to labor shortages, rising staff costs, global supply chain constraints and increased freight and shipping costs.
On Monday, Jefferies analysts said Amazon could raise the price of Prime memberships in the near future to help offset some of the headwinds it faced. JPMorgan analysts also previously expected that Prime membership fees and fees for Other Amazon services would rise across the board in response to the recent increase in execution fees for FBA warehousing logistics by about 5%.
Amazon raised the price of Prime members in March 2014 and May 2018, respectively, after the previous two price increases were $20, and the annual membership price increase to 139 yuan mainly affected 140 million US Prime users, because prime also needs to develop more users overseas.
Rivian's investment has exploded into profits, and the layout of offline physical territory has become a new point of strength
In the quarter, the profit that far exceeded expectations came from Amazon's huge return on investment in "Tesla rival" Rivian. Rivian, the first U.S. manufacturer to build an electric pickup truck, went public on the NASDAQ in November, with an issue price of $78 and $12 billion in financing, and on the first day of the IPO, it opened about 35% higher, and then surpassed General Motors and Volkswagen in terms of market capitalization, once ranking the world's third-largest automaker.
Before the IPO, Amazon held a whopping 20% stake in Rivian (worth $3.8 billion), and although it has experienced a peak of $172 in pricing to the current level of $60, Amazon still earns excess profits in return on investment.
In addition, Amazon is expanding its offline territory to take another step, following bookstores, daily necessities, and unmanned convenience stores, and then impacting the fashion circle. Amazon announced in January that it would open an offline clothing store called "Amazon Style" that meets customers face-to-face.
Amazon has been pouring profits into physical expansion, and Analysts at Jeffery expect it to open 350 new facilities in 2021. At the same time, Amazon has also raised wages to an average of $18 an hour to attract workers and add incentives to offer signing bonuses worth up to $3,000 in some markets.
Amazon was the last of the big tech companies to post earnings, and it was a rollercoaster-like earnings season that had a good finish. Netflix kicked off the earnings season disastrously with its subscribers falling short of expectations, followed by Microsoft, Apple and Google Alphabet boosting market confidence more than expected, after which the Meta crash set off a wave of tech stock sell-offs.