Amazon is notorious for being profitable one quarter and reporting a loss the next. Investors seemed to have enough of the drama in 2014 and sent the stock down almost 22% over the course of the year. By the end of 2014 Amazon bulls were convinced a turnaround would come in the new year. In fact, shares were in slight positive territory as of the closing bell Thursday and moved more comfortably into the green after hours.
The cause of the latest surge? Stronger than anticipated fourth quarter profit.
Amazon.com reported $29.3 billion in fourth quarter revenue, up 15% from the same period a year ago but somewhat short of Wall Street analysts' consensus call for $29.7 billion in revenue. The stock nonetheless jumped close to 7.5% in after-hours trading to over $335 on far stronger than expected profits. Net income came in at $214 million. On a per share basis this is 45 cents -- which is more than 2.5-times the Street's forecast of 17 cents a share.
[Update: By 5:15 p.m. the stock was up almost 12% to over $347 a share.]
On a full year basis Amazon reported a $241 million net loss on $88 billion in revenue. The loss per share was 52 cents versus a 59 cent per share loss in 2013. Two of four quarters were profitable (the first and the fourth).
“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," said billionaire CEO and founder Jeff Bezos, referring to the retailers March announcement that prices for Prime would go from $79 to $99 a year.
In his typically hard-number-lacking fashion Bezos continued, "The data is in and customers agree — on a base of tens of millions, worldwide paid membership grew 53% last year — 50% in the U.S. and even a bit faster outside the U.S. Prime is a one-of-a-kind, all-you-can-eat, physical-digital hybrid — in 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video. We’ll continue to work hard for our Prime members.”
Amazon has never released the number of prime members but pegged it at somewhere above 20 million around this time last year. That presumably would put it somewhere above 30 million at this point but it could be many more.
For a long time the retailer's subscription service was best known for free shipping but earlier this month Amazon's series Transparent -- which is only available on Prime Instant Vide0 -- won two Golden Globe Awards. Shortly after that the company announced Woody Allen will be creating an original series for the service. Suddenly the retailer is being looked at as a viable Netflix competitor (even though the recent surge in that stock suggests its investors aren't too worried) and its Prime offering is becoming attractive to a wider group. (Netflix finished 2014 with 61.4 million worldwide subscribers.)
Looking ahead Amazon forecast revenue between $20.9 billion and $22.9 billion for the first quarter of this year. That would be a 6% to 16% improvement over a year earlier. The company, however, anticipates a best a decline in operating income and at worst a steep operating loss for the quarter. Amazon says the range is from negative $450 million to positive $50 million.
