The US group managed the announced cost avalanche due to the enormous need for personnel and the high investments in delivery logistics better than feared – not least thanks to its highly profitable cloud business.
However, the growth outlook has clouded significantly after the e-commerce boom during the pandemic. Investors are still satisfied – also because Amazon is increasing prices in the US home market for the first time in years.
When the figures were presented on Thursday, it became apparent that the US group far exceeded profit expectations in the final quarter: the surplus was $14.3 billion (12.5 billion euros), almost twice as high as a year ago . The main reason for the strong increase, however, was Amazon’s stake in the electric car manufacturer Rivian Automotive, through which the group was able to post high special proceeds on its balance sheet when it went public in November. Operating profit — which better reflects business performance — fell by almost half to $3.5 billion, Amazon said on Thursday after the US market closed.
Sales growth was also quite meager by Amazon’s standards. Revenue climbed 9 percent to $137.4 billion. For the current quarter, the company expects sales of between $112 billion and $117 billion, which would correspond to an increase of between three and eight percent over the previous year. Analysts had expected a higher forecast. On the other hand, Amazon’s cloud business with storage space and applications on the Internet continues to flourish. Flagship AWS grew revenue 40 percent to $17.8 billion for the quarter and posted a surprisingly high profit of $5.3 billion.
“As expected, we had higher costs, driven by tight labor markets and inflationary pressures,” said Amazon CEO Andy Jassy in the annual report. Due to the rampant omicron virus variant, these problems are likely to continue in the current quarter. “Despite these short-term challenges, we remain optimistic,” the manager continued. Three months ago, Amazon had already warned investors of additional expenditures worth billions due to higher wages, global problems in the supply chain and increased freight costs and adjusted to poor numbers.
The company’s announcement that it would increase the prices for its “Prime” service in the USA for the first time since 2018 was well received by shareholders. The service, which offers access to free shipping and streaming services, among other things, is becoming significantly more expensive: from February 18, new US customers will pay $14.99 instead of $12.99 per month and $139 instead of $119 per year. The new tariffs will take effect for existing customers in March. According to Amazon, no higher prices are initially planned outside the USA. However, there is plenty of scope here. In Germany, the “Prime” subscription has so far been significantly cheaper than in the USA at 69 euros per year or 7.99 euros per month.
In the entire past fiscal year, Amazon increased sales by almost 22 percent to $469.8 billion. The operating result increased by almost nine percent to 24.9 billion dollars. Amazon had significantly higher expenses than in the previous year due to its investment and hiring offensive. In the fourth quarter alone, the now second largest US employer behind Walmart hired around 140,000 employees. According to Amazon, it now has a total of more than 1.6 million employees worldwide. In the USA, however, there is already trouble with employee representatives again.
Starting this Friday, the online giant will have to endure another vote on union representation. From February 4 to March 25, workers at a logistics warehouse in Bessemer, Alabama, will be able to vote again to join the RWDSU union. If the employees speak out in favor of this, a US union would be able to move into Amazon for the first time. Actually, the initiative had already failed a year ago. But the US Occupational Safety and Health Administration NLRB found that Amazon had improperly influenced the election and is therefore voting again.
Goldman raises target for Amazon to $4,200 – ‘Buy’
The US investment bank Goldman Sachs has raised the price target for Amazon from 4,100 to 4,200 US dollars and left the rating on “buy”. The online retailer presented solid fourth-quarter figures, with strong Christmas sales and positive first-quarter statements, analyst Eric Sheridan wrote in a study published on Friday. In addition, Amazon has addressed many of the most important topics for investors recently, such as supply chains, the macroeconomic environment shaped by the pandemic.
JPMorgan raises target for Amazon to $4,500 – ‘Overweight’
The US bank JPMorgan has raised the price target for Amazon from 4,350 to 4,500 US dollars and left the rating at “Overweight”. The results of the final quarter and the outlook for the first quarter of the Internet group are positive, wrote analyst Douglas Anmuth in a study available on Friday. From the second quarter, sales growth should also accelerate again, as the analyst expects. Stocks is one of his favorites.
Amazon shares, which are listed on the NASDAQ, rose at times by 15.26 percent to $3,200.61.
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