$AMZN reported their Q4 2021 earnings and offered upcoming guidance, and this is a very interesting

• 02/04/22

$AMZN reported their Q4 2021 earnings and offered upcoming guidance, and this is a very interesting one, so let’s jump into it. So $AMZN expected Revenue of $137.59bn and came in with a miss at $137.41bn in Revenue. The big talking point is that the expected EPS was $3.44, and they came in at a staggering $27.75, a 706% beat. At first glance this looks unbelievable, but we need to break this down a little further. In their earnings report, Amazon stated “Fourth quarter 2021 net income includes a pre-tax valuation gain of $11.9 billion included in non-operating income from our common stock investment in Rivian Automotive, Inc”. This means that in their Q4 earnings, Amazon is including their unrealized gains from their share of $RIVN while it traded at a much higher valuation than it currently is. For reference of how huge of a difference this makes, if you take away that income, their EPS is roughly $4.20, or 22% higher than expected. This will be something to watch in the future, as $RIVN trades much less than it did in Q4, so it will be interesting to see if they continue to factor in these unrealized gains in their earnings. $AMZN also reported that net sales increases 9% in Q4, a decrease in operating income to $3.5bn, down from $6.9bn in Q4 2020, and an overall strong 2021. As for guidance, they offered their Q1 2022 guidance, expecting growth between 3%-8%, with operating income between $3bn and $6bn. Amazon also reported that they will be raising the annual price of Amazon Prime, from $119 to $139, a move that stockholders seemed to enjoy, but is bad news for Prime members. In their earnings call, Amazon’s CFO Brian Olsavsky mentions that inflation has hit Amazon hard, with $4bn in costs from inflationary pressures. He says “The inflation primarily relates to wage increases and incentives in our operations as well as higher pricing from third-party carriers supporting our fulfillment network”. He then shifts to mention the growth of AWS (Amazon Web Services) and highlights major companies using AWS. While they see things improving, Cost pressures will be an issue in Q1. “We have to work to now make our operations more efficient as we get staffing levels up” says Mr. Olsavsky. A commonly held belief amongst economists is that many large corporations will be able to come out of the pandemic and the subsequent supply chain shortages stronger, more efficient companies, and Amazon here is sharing their vision to make that a reality. Amazon also mentions paying for products earlier to secure their allocation from vendors and opened up new and existing channels of input to ease these constraints, making it clear that demand was never the issue. They also do not expect to see many supply chain issues in Q1, which is a big takeaway, as that is a very different tone from many other companies. They also mention they are seeing strength in the growth of AWS outside of the United States. They want to take advantage of the “momentum” they have and rapidly expand into emerging markets. Amazon also talks about the strength of their advertising services, and the platforms such as Twitch and Fire TV that they have been seeing growth on. Overall, $AMZN has a strong outlook on the macro scale, but their guidance for the upcoming quarter tells a different story. Amazon’s growth is important to keep track of, as a high PE company they are expected to grow quickly, but 3%-8% growth in Q1 when analysts were expecting upwards of 15%, is not a good sign. For full transparency, at the time of writing this I do not own any shares in $AMZN. Thank you for reading! #investing #learning #amazon #earnings #publiccommunity #Rivian #2022 #stocks #growth

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