Amazon Shares Jump as Earnings Top Expectations

Amazon.com’s shares jumped in after-hours trading Thursday, when the online retail giant posted a larger-than-expected profit.

The company, which saw solid sales gains in the quarter that includes the year-end shopping season, reported net income of $214 million in the fourth quarter, or 45 cents per diluted share.

Even though that’s less than the $239 million, or 51 cents per diluted share, of net income in the year-ago period, it’s well above the consensus projections of 18 cents a diluted share that analysts had been projecting. It also ended the string of two consecutive losing quarters.

Sales grew 15 percent to $29.33 billion. Analysts had expected $29.71 billion in sales.

One key to those solid numbers: a huge gain in Amazon Prime membership, the $99-a-year service that offers shipping on millions of products at no additional costs. Amazon raised the annual subscription price by $20 last year, but suffered no ill-effects.

“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping. The data is in and customers agree — on a base of tens of millions, worldwide paid membership grew 53 percent last year — 50 percent in the U.S. and even a bit faster outside the U.S.,” Amazon founder and CEO Jeff Bezos said in a statement.

In a call with journalists, Amazon CFO Tom Szkutak noted that Prime subscribers shop more often and buy more products than non-Prime customers.

“When a customer becomes a Prime member, they do step up their purchases considerably,” Szkutak said.

For years, shareholders had been willing to watch Amazon rack up losses, or at least post skimpy profits, while it invested in new businesses that it might one day dominate. But a year ago, that patience waned. In the fourth quarter of 2013, Amazon missed earnings expectations and, within months, its shares lost a quarter of their value.

Amazon shares ended Thursday’s regular trading session up $7.87 at $311.78. In after-hours trading, the shares rose another $38.15, or 12.2 percent, to $349.93.

While Amazon made money in the fourth quarter, it’s projecting losses or possible slight profit in the current quarter. According to Amazon’s guidance, it expects results in the range of a $450 million operating loss to a $50 million operating profit, compared with $146 million operating profit in the first quarter a year ago. Amazon expects sales of between $20.9 billion to $22.9 billion, up 6 percent to 16 percent.

This article appeared in print in the January 30th, 2015 edition of Hamodia.