Amazon Q4 Results above analysts' expectations

Amazon Q4 results
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Increase in revenue - Amazon reported revenue of $137.4 billion against analysts' forecast of $137.6 billion. The revenue in the fourth quarter grew by 9.4%, it is the first period of single-digit growth since 2017. Revenue from Amazon Web Services (AWS) was marginally higher than analysts' expectation of $17.37 billion and stood at $17.8 billion, 40% growth YoY.

Revenue from advertising business - The company disclosed revenue from its advertising business for the first time. Advertising services grew 32% YoY to $9.7 billion during the quarter. Previously, Amazon included advertising revenue in its “other” business segment.

Net income doubled - The net income reported by the company doubled YoY mainly because of its investment in electric vehicle company Rivian. The company reported $14.3 billion in net income for Q4 compared to $7.2 billion during the last three months of 2020. The company reported a gain of almost $12 billion from its investment in Rivian.

Guidance for Q1 - Amazon guided for first-quarter revenue of between $112 billion and $117 billion. It is below analysts' expectations of $120 billion.

Tight Labor market - Consumers leaned heavily into buying online during the pandemic, driving up costs for labor and delivery. Amazon last year hiked wages to an average of $18 an hour to lure workers and has increased incentives, offering signing bonuses worth as much as $3,000 in some markets.

Increase in price of Prime Membership - Amazon hiked the price of its Prime membership for the first time in four years. Overall, it is the third time since the launch of Amazon Prime that Amazon has announced a fee hike for its yearly delivery service in the U.S. The price of its annual Prime membership to $139 from $119. The cost of the monthly Prime membership will also increase to $14.99 from $12.99. The price change will go into effect for new members on Feb. 18, and for current members after March 25.

Target Price - The 43 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of $4,000, with a high estimate of $5,000 and a low estimate of $3,473. 

Amazon Q4 Results Review

Amazon has reported a good set of numbers for Q4, mainly driven by its investment in electric vehicle company Rivian. Even with the weaker-than-expected sales number and disappointing guidance, Amazon gave investors enough confidence that growth will recover. Even though advertising has always been viewed as a tangential business for Amazon, the company has had so much success attracting ad dollars that it’s now third in the US market, behind Google and Facebook. 

The Amazon share price is up by 14% in pre-market session.

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