Amazon stock price soars in the fourth quarter

The markets were strong on Friday, with one of the key catalysts being: Amazon (NASDAQ:AMZN) soared on strong performance.

E-commerce giant Amazon far surpassed market expectations thanks to a huge holiday shopping season. As a result, the company’s shares rose about 8% on Friday afternoon to nearly $172 per share, the biggest gain on a day when all three major indexes rose.

Record holiday shopping season

The 2023 holiday shopping season broke records, driving Amazon’s net sales to $170 billion, up 14% from the fourth quarter of 2022. The largest growth segment was International, with sales up 17%. North American sales for the quarter increased 13% to $105.5 billion.

Cloud computing business Amazon Web Services (AWS) surged 13% in net sales for the quarter to $24.2 billion.

Overall, Amazon’s net income increased from $278 million, or 3 cents per share, to $10.6 billion, or $1 per share, in the fourth quarter of 2022. This figure is somewhat distorted by Rivian stock’s loss of $2.3 billion in the fourth quarter of 2022. It lost $100 million this quarter.

“This fourth quarter was a record-breaking holiday shopping season and capped off a strong end to 2023 for Amazon,” said Amazon CEO Andy Jassy. “While achieving meaningful revenue, operating profit and free cash flow, what excites us most is the continued invention and improvement of the customer experience across our business. Regionalization of our U.S. fulfillment network enables our fastest delivery speeds ever for Prime members while also reducing service costs.”

This year, I purchased more items from Amazon throughout the holiday season than any other year. This season was highlighted by a huge amount of deals during Black Friday and Cyber ​​Monday, when deals and discounts abounded. Consumers purchased more than 1 billion items in the 11 days that included these two events, saving nearly 70% compared to the same period in 2022. About 500 million of those items came from independent sellers.

Amazon has also significantly improved its delivery times, which has undoubtedly contributed to the surge in sales. The number of same-day or next-day deliveries on the company’s same-day site increased 65% year-over-year in the fourth quarter.

Among other new initiatives this quarter, Amazon announced a partnership with automaker Hyundai to sell cars online starting this year. We’ve also added medical options for Amazon Prime members through One Medical.

Analysts are optimistic

Amazon executives said in their first-quarter guidance that they expect net sales to be between $138 billion and $143.5 billion, up 8% to 13% from the first quarter of 2023.

Operating profit is expected to be between $8 billion and $12 billion, a significant increase from $4.8 billion in the same period last year.

Several analysts upgraded Amazon after the explosive quarter, including RBC Capital, which raised its price target from $180 to $215 per share. In general, analysts cited better-than-expected revenue from AWS, the company’s ability to grow market share in e-commerce, and ample free cash flow to fund further growth, among other things.

Amazon’s free cash flow at the end of 2023 was $36.8 billion, up from $11.6 billion at the end of 2022.

Friday’s gains put Amazon shares up about 14% so far this year. I’m not as bullish on the near term as some, given its higher valuation and potential economic slowdown, but there aren’t many stocks better to own than Amazon over the long term, and the last quarter showed why.