Amazon Prime Membership Fee Hike Led the Company Gain Huge Profit Resulting in Surging Stock Price (AMZN)
Sharp profits from Amazon.com Inc., Snap Inc., and Pinterest Inc. helped calm anxieties following Meta Platforms Inc.’s stock plunge, and the Nasdaq 100 index seemed poised for a comeback Friday. This happened after Amazon Prime Membership fee increased overnight.
In post-market trading, the Invesco QQQ Trust Series 1, the largest exchange-traded fund that follows the Nasdaq 100, rose as high as 2.2 percent. The gains were led by Amazon, which jumped 19 percent after the ecommerce giant posted a profit that surpassed expectations and announced that the price of a Prime membership will be raised.
Snap gained 56% and Pinterest jumped 17% as their earnings showed that Meta’s results didn’t portend a larger social media slump. To be honest, those advances followed a massive selloff in the regular session, which saw Meta’s value plummet to its lowest level in US stock market history. Snap was down 24% and Pinterest was down 10%, while the Nasdaq 100 was down 4.2 percent, the highest since September 2020.
Even after Thursday’s after-hours rally, Amazon and Snap shares were still trading at levels last seen in mid-January, demonstrating the severity of the current selloff.
Etsy Inc. (+7.1 percent), DoorDash Inc. (+7.3 percent), Snowflake Inc. (+4.2 percent), and Airbnb Inc. (+2.9 percent) were among the firms that benefitted from the post-market surge.
Amazon is reporting good fourth-quarter sales and profitability, despite the fact that the online titan is still dealing with rising expenses due to a clogged supply chain and labour shortages.
The Seattle-based corporation recently increased its yearly premier membership cost from $119 to $139. Amazon has upped the price of Prime membership for the first time since 2018.
For the three months ending Dec. 31, 2021, the firm had a profit of $14.32 billion, or $27.75 per share. In the previous quarter, the company earned $7.22 billion, or $14.09 per share, compared to a profit of $7.22 billion, or $14.09 per share, the year before. Revenue increased 9% to $137.41 billion, marking the company’s sixth quarter in a row with revenue over $100 billion.
Analysts polled by FactSet, on the other hand, predicted $137.68 billion in quarterly sales and $3.61 per share profits.
Sales for the upcoming fiscal quarter are estimated to be between $112 billion and $117 billion, according to the business. According to FactSet estimates, analysts were anticipating $120.93 billion.
During the COVID-19 epidemic, Amazon was one of the few shops who did well: Homebound consumers went to Amazon for everything from food to cleaning products while non-essential establishments shuttered temporarily or permanently.
However, as newly vaccinated Americans gain confidence in venturing out, increase has halted. And, like many others, the firm is contending with global supply chain challenges and labor constraints.
The company’s profits came during a tense week for Big Tech earnings. Apple Inc., Microsoft Corp., and Alphabet Inc. all had great quarters. However, Meta Platforms Inc. saw its stock plummet the most in a single day in its history on Thursday, a day after announcing slower user growth in its flagship Facebook app.
Amazon told investors in October that it would spend billions during the Christmas season to guarantee that goods reached consumers despite supply-chain delays and a severe labor shortage. A large portion of the money was spent on employing 140,000 new employees, falling just short of the company’s goal of 150,000 for the quarter.
Amazon also showered incentives on employees, deployed half-empty cars if it meant delivering products on schedule, and booked space on whatever ship it could find in a $22.4 billion spending binge.
The enormous outlays helped customers see the value of Prime membership, allowing Amazon to raise the price by $20 to $139 per year for the first time since 2018. Amazon Prime, which provides members with shipping reductions, video streaming, and other benefits, aids in the conversion of casual consumers into devoted customers. On average, Prime members spend more on Amazon than non-members.