Amazon: Seeing really big pop on earnings, +17% after hours; here is our quick take
Amazon is making a Prime move following its Q4 report, despite Q1 revenue and operating income guidance being a bit light.
We think the main reasons the stock is up:
- First, a big number from AWS looks like the main reason. With +39.5% growth, that's a modest acceleration from +39% growth in Q3, +37% growth in Q2, +32% in Q1 and +28% in 4Q20. Remember that MSFT saw Azure revenue growth dip to +46% in DecQ when it reported last week, which was a decent size decline from around +50% the past few quarters. Maybe AWS is taking share; either way, was really impressive. It's helping investors overlook the shortfall on online sales.
- Second, we do not have a clean adjusted EPS number from AMZN, but the Q4 operating income number at $3.46 bln was above the high end of prior guidance of $0-3 bln and above consensus of $2.57 bln. So that is a decent proxy for profitability. AMZN really stressed last quarter that inflation, especially higher wages, would take a bite out of Q4, but it turned out less bad than expected. And this was no gimme, after missing consensus in Q3.
- Third, we also think investors love the Prime subscription price increase; it shows that management is confident in its business and they know subscribers will pay it.