When we launched the $10,000 BizNews Shyft portfolio in December, a disappointment was being unable to include all-time favourite counter Amazon.com. At over $3,000 each, adding a single share would simply have required too high a weighting. Although it’s not entirely absent – Amazon is 6.65% of the QQQ ETF which is 35% of the BN Shyft portfolio – we’d dearly loved to have owned a stake similar to the 21% in the long-standing BizNews Webtrader portfolio. Even more so after last night’s cracking quarterly results from Jeff Bezos’s creation. As you will read in the piece below from our partners at The Wall Street Journal, Amazon’s numbers surprised pundits, its share price jumping 14% after-hours in the wake of a 7% pre-results decline. Among forgotten facts was the huge strides Amazon has taken in securing its global supply chain through decisions like investing in its own fleet of container ships. We bought into the Amazon story in December 2014 when the shares were $328 each. Despite the temptation to take profits, we have followed the Warren Buffett principle of applying an average holding period of “forever”. Wise old owl that Oracle of Omaha. – Alec Hogg
Use Spotify? Access BizNews podcasts here.
Use Apple Podcasts? Access BizNews podcasts here.
___STEADY_PAYWALL___
Amazon Profit Shows Resilience Even as Labor, Supply Crunch Weigh on Results
E-commerce giant sees big boost in quarter from investment in electric-vehicle maker Rivian
By Sebastian Herrera of The Wall Street JournalÂ
Amazon.com Inc. said profit nearly doubled in the critical holiday period, as the company managed to control labor and supply costs better than expected and saw gains in its cloud-computing and advertising businesses.
The company saw a huge boost in the quarter from its investment in electric vehicle-maker Rivian Automotive Inc. That added nearly $12 billion in profits, accounting for the majority of its earnings for the quarter.
The tech and e-commerce giant reported $137.4 billion in quarterly revenue, up from $125.6 billion in the same period a year ago. Profit rose to $14.3 billion, from $7.2 billion a year ago. The financial results were a surprise to some analysts who expected earnings to be more subdued as Amazon dealt with rising costs on a variety of fronts.
Amazon shares rose more than 14% in after-hours trading Thursday. The company signaled a more positive outlook than previous quarters even though growth has slowed. It said it expects operating income to be between $3 billion and $6 billion for the current quarter, compared with $8.9 billion during the first quarter of 2021. Per-share earnings were more than seven times the average of $3.63 a share expected by analysts polled by FactSet.
“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,” Chief Executive Andy Jassy said in a statement. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”
Amazon said it would raise the price of its Prime membership service from $119 a year to $139, citing higher costs related to wages and transportation, as well as continued expansion of benefits under the membership. The company last raised the program’s cost in 2018. Memberships include access to Amazon’s fast delivery service as well as video streaming and other entertainment.
Some analysts said the increase in price for Prime membership played a significant role in investor enthusiasm for Amazon’s results.
Even as Amazon shares rallied on the news, several of the world’s biggest technology companies struggled Thursday, a signal that the tech boom that powered the U.S. stock market and some of the country’s economic resilience in recent years is coming under pressure. While many saw their shares rise after reporting strong sales and earnings growth in the fourth quarter, others fell precipitously in the face of a labor shortage, changes in advertising markets and inflation pressure.
Meta Platforms Inc. (formerly known as Facebook Inc.) reported a decline in its user base and said its advertising business had been hit hard by Apple’s new privacy measures. Meta’s shares fell by more than 20%, and shares of PayPal Holdings Inc. and Spotify Technology SA fell by similar amounts.
Amazon fared better than many others during the Covid-19 pandemic, booking record earnings as consumers embraced and accelerated a shift to online shopping. The e-commerce market received a huge windfall, and no company benefited more than Amazon, which accounts for 41% of all sales online, according to the research firm Insider Intelligence. During the past two years, Amazon has seen the most profitable quarters in its history.
But lately investors had come to fear that Amazon’s tremendous growth would slow amid global supply-chain disruptions and labor challenges. Amazon executives said last year that the company would spend roughly $4 billion in the fourth quarter to deal with higher freight and shipping costs, labor shortages and global supply-chain challenges. Amazon has boosted its pay for workers to an average of $18 an hour and offered sign-on bonuses of as much as $3,000 in some areas.
The results on Thursday showed that those investor concerns were well-founded. Amazon lost money in its sprawling e-commerce business, with about $206 million in operating losses in the U.S. and $1.63 billion in losses internationally. Its online stores segment, which includes product sales and digital media content, fell by 1%.
Amazon Chief Financial Officer Brian Olsavsky on Thursday said the company sees its labor challenges diminishing as the new year starts, although it has been affected by absent workers out sick from Covid-19.
Amazon’s global head count now totals about 1.6 million. Mr. Olsavsky said the company had aimed to hire 150,000 employees in the fourth quarter but was only able to add 140,000 employees. The company also sees supply chain problems easing. “We do see the sun coming out and getting better here over the next number of quarters,” he said.
Still, despite struggles in its e-commerce operations, Amazon was able to lean even more on new and emerging business lines, including its investment in Rivian, which saw outsize gains in an IPO. Amazon also saw tremendous growth in its highly profitable cloud-computing business and fast-growing advertisement segment.
Amazon Web Services, or AWS, which rents computing, storage and networking capability to users, saw fourth-quarter revenue rise by about 40% to $17.8 billion, while ad sales grew 32% to $9.7 billion. The cloud-computing unit accounted for more than $5 billion in operating income.
Meanwhile, the advertising division has surged as a result of new ad opportunities across Amazon’s array of businesses. Amazon for the first time ever broke out advertising revenue by name in its financials. The unit has typically been reported under a broader revenue stream.
Amazon is starting the new year with an eye on continued expansion in its business segments, particularly in entertainment. The company this year will begin to have exclusive video rights to “Thursday Night Football,” and it is waiting to close its acquisition of the Hollywood studio MGM, which is expected to bring an array of notable titles under the company’s name. Amazon agreed to pay $9 billion for MGM, including debt. The Federal Trade Commission is reviewing the deal.
