Thursday was yet another tough day for US tech stocks in 2022. Several companies’ stocks crashed after disappointing investors accustomed to heroic growth during the Covid-19 pandemic. As a result, the tech-heavy Nasdaq Composite index fell by 538.73 points to close at 13,878.82, sliding more than 3.7%. One share to suffer in this tech slump was Amazon (NASDAQ: AMZN) stock, which fell by $235.34 to close at $2,776.91, diving more than 7.8% since Wednesday. However, after the US stock market closed on Thursday, the retail behemoth released its fourth-quarter results. And pre-market futures suggest that Amazon stock is set to soar at Friday’s market open!
Amazon’s sales soar by 22%
In 2021, Amazon’s net sales leapt by 22% to $469.8bn, versus $386.1bn in 2020. Excluding favourable foreign-exchange rates, net sales increased by 21% year on year. Operating income hit $24.9bn, versus $22.9bn in 2020, rising 8.7%. Meanwhile, net income exploded to $33.4bn ($64.81 per share), a mighty 56.8% ahead of 2020’s $21.3bn ($41.83 per share). However, Amazon missed several of its financial estimates for 2021 and also saw a 30% fall in operating cash flow to $46.3bn, versus $66.1bn in 2020. Yet Amazon stock is set to leap when New York opens this afternoon.
Amazon Prime to cost $20 more
Amazon also warned investors that “rising wage and transportation costs” have forced the group to raise the price of its popular Prime subscription service. In the US, Prime membership will increase from $12.99 to $14.99 a month, with annual membership rising $20 to $139 from $119. For new members, the price increase takes effect on 18 February. For existing members, the price hike happens on the date of their next renewal after 25 March. This is the first time Amazon has raised the price of Prime since 2018 and the third increase since Prime’s introduction in 2005. Although the market welcomed this news by bumping up Amazon stock, some Prime subscribers will cancel memberships in response to this price hike. But with 150m US Prime subscribers, Amazon can easily swallow these cancellations.
Amazon stock set to surge on Friday
In after-market trading, Amazon stock surged as much as 18%. As I write, stock futures suggest Amazon shares will open 11.6% ahead of Thursday’s close. With Amazon already worth more than $1.4trn, this will add around $164 to Amazon’s market value. What a comeback from Thursday’s slide.
Then again, Amazon’s net income in Q4/21 was boosted by a pre-tax valuation gain of $11.8bn from its stock investment in electric Rivian Automotive. Since Rivian floated in November, its market value has collapsed from a peak of over $160bn to $54.3bn today. With Rivian stock crashing by 41.8% since 31 December, this will produce a hefty write-down in Amazon’s next set of results. However, investors looked past this setback and welcomed surging revenues at two Amazon powerhouses: Amazon Web Services (AWS) and Ads. Cloud-computing service AWS reported 40% annual revenue growth and generated more than 100% of Amazon’s net income. At Ads, revenue leapt by 32% to $9.72bn for 2021. Even so, Amazon forecast sales of $112bn to $117bn in Q1/22, versus analysts’ expectations of over $120bn.
In summary, despite a predicted sales slowdown and rapidly rising costs, investors have yet to lose faith in the e-commerce Goliath. Let’s see what happens to Amazon stock when the market opens on Friday…
Cliffdarcy has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
