'Resurrection Day': Amazon (AMZN) Stock Rallies on Raised Prime Pricing and Strong AWS Growth, Analysts Raise Numbers

Shares of Amazon (NASDAQ: AMZN) are up 13% in pre-market Friday after the e-commerce giant reported Q4 2021 earnings.

Amazon posted an adjusted EPS of $5.80, compared to the analyst consensus of $3.57, according to Refinitiv. The beat was driven by its investment in electric vehicle maker Rivian.

Revenue came in at $137.4 billion, slightly missing the consensus of $137.6 billion. AWS revenue was $17.8 billion, topping the estimated $17.37 billion, according to StreetAccount.

Operating profit in the fourth quarter is expected to range between $3 billion and $6billion, while sales surged 9.4% to $137.4 billion during the period.

For the first time, Amazon reported revenue for its advertising business, which saw 32% YOY growth in advertising services to $9.7 billion.

“It had been the majority of other revenue,” said Brian Olsavsky, CFO of Amazon. “We’re very happy with ad growth. It continues to drive value.”

As for Q1 2022, Amazon said it expects revenue in the range of $112 billion to $117 billion, missing analyst consensus of $120 billion.

Even though Amazon reported worse-than-expected revenue and issued weak guidance for Q1 2022, the company and investors remain confident about Amazon’s growth in the future.

“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,” said Amazon CEO Andy Jassy. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Amazon, which invested more than $1.3 billion into Rivian (NASDAQ: RIVN), owned 22.4% of the company’s Class A shares prior to the IPO.

JPMorgan analyst Doug Anmuth reiterated Top Pick designation on Amazon and raised the price target to $4,500.00 per share from the prior $4,350.00.

“AMZN's 25% growth on a 2-year CAGR was steady w/3Q levels, reflecting the benefits of a front-loaded holiday season & continued strong secular shift to the cloud. Looking into 2022, certain macro pressures will remain & Omicron will create further disruption, but with greater normalization we believe AMZN can see a path out of certain elevated labor costs. We continue to expect revenue growth to re-accelerate beginning in 2Q as comps ease & Prime 1-day/same-day benefits increase, and we also believe AMZN's investments will slow following 2 heavy years, creating room for margin expansion,” Anmuth wrote in a client note.

UBS analyst Lloyd Walmsley also raised the price target to $4,625.00 per share from the prior $4,550.00 as he sees “greener pastures ahead.”

“We remain constructive on Amazon shares following a solid 4Q with a better than feared outlook, particularly around OI. The company followed up its FBA price hikes from late 2021 with plans to raise Prime prices, consistent with our thesis outlined in our initiation, which should boost margins later this year. Management's tone on the call/callback was bullish, in our view, whether it was on network buildout (both AWS and transportation) or incremental costs dissipating through,” Walmsley wrote in his report.

By Senad Karaahmetovic | [email protected]

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