Amazon announced a price hike for Prime membership, and made a lot of money with electric cars in the fourth quarter

2022-05-20 0 By

Unlike Meta, which saw its stock plunge by more than $200 billion after its earnings report, Amazon’s stock rose after the release of its new quarterly earnings report.On Feb. 4, Amazon announced its financial results for the fourth quarter ended Dec. 31, 2021.Amazon’s net sales rose 9.4% to $137.4 billion in the fourth quarter of 2021, compared with $125.6 billion in the fourth quarter of 2020, according to the results.In terms of net income, Amazon posted net income of $14.3 billion in the fourth quarter, up 98.3 percent from $7.2 billion in the same period last year, a sharp increase from the 50.2 percent decline in the third quarter.Much of the increase was due to gains on Amazon’s investment in Rivian, an electric carmaker.Amazon said its fourth-quarter net income included a pre-tax valuation gain of $11.8 billion, including non-operating gains on its investment in Rivian common stock, which completed its initial public offering in November 2021.Among them, product sales were $71.42 billion, up 0.5% from the same period last year, and service sales were $66.08 billion, up 21% from the same period last year.For the full year of 2021, Amazon’s net sales rose 22 percent to $469.8 billion and its net profit was $33.36 billion, up 56.4 percent from $21.33 billion in 2020.In response, Amazon CEO Andy Jassy said, “We saw labor supply shortages and inflationary pressures leading to higher costs, which continued into the first quarter thanks to Omicron.Despite these short-term challenges, we continue to be optimistic about our business as we emerge from the pandemic.”Foreign analysts attributed the post-earnings rise to amazon’s cloud computing sales beating Wall Street expectations and the company raising the price of its Prime subscription, allaying some concerns about the impact of higher costs on profitability.Amazon’s net sales in North America were $82.36 billion, up 9% year on year.Global e-commerce net sales were $37.27 billion, down 1% year on year;AWS reported fourth-quarter net sales of $17.78bn, up 40 per cent from a year earlier.Amazon said that more than 130,000 third-party sellers worldwide made more than $100,000 in sales on Amazon during Black Friday 1, and that third-party sellers in the United States sold an average of 11,500 products per minute between Black Friday and Christmas.AWS sales accounted for 12.9% of the parent company’s sales in the fourth quarter, and while sales were a small percentage, AWS operating profits supported total operating income.AWS posted an operating profit of $5.29bn in the fourth quarter, compared with an operating loss of $1.63bn globally and $210m in North America, compared with Amazon’s total operating income of $3.46bn in the quarter.From a trend point of view, this means that the core of Amazon’s e-commerce business is being challenged by its services business.Amazon has long been known for selling a wide range of goods, but service sales have been growing at a faster rate for years.It was up 21% in the current quarter and 42.4% and 29% in the last two quarters, while product sales were up slightly in consecutive quarters, with the 0.5% increase in the fourth quarter almost negligible.Service sales include commissions and fees collected from third-party sellers, sales related to amazon Web Services, its cloud computing platform, subscriptions to digital content, advertising fees, and more.Amazon also announced price increases for Prime members.Over the past few years, Amazon has ramped up its offerings for Prime members, including Prime shipping, more deals and discounts, and more high-quality digital entertainment, including TV, movies, music and books.Amazon is raising the price of Prime members in the U.S. to $14.99 a month from $12.99 and to $139 a year from $119, up 17% from a year ago, in line with expanded Prime membership benefits and higher wages and transportation costs, the company said in its earnings statement.At the same time, Amazon is facing stiff regulatory resistance, with the Federal Trade Commission investigating the company’s alleged use of third-party seller data to sell its basic Amazon brand products.In addition, the FTC is reviewing Amazon’s planned $8.45 billion acquisition of Hollywood studio MGM, a move intended to strengthen its video offerings and better compete with the likes of Netflix and Disney+.Amazon said in its earnings statement that it expects net sales for the first quarter of 2022 to be in the range of $112 billion to $117 billion, up 3% to 8% from a year ago.