Amazon (AMZN) bulls may finally have a reason to smile – just as the company’s logo suggests – after a relatively lousy winter, according to a recent report from Bank of America (BAC) Global Research.
“We continue to view Amazon as our best FANG and large-cap internet stock for 2022,” Bank of America analyst Justin Post wrote in his report. “Amazon’s Earnings Outlook Improves as COVID’s Impact on Labor and Supply Chain Eases.”
Amazon pushed markets higher on Friday and was the best performing FANG stock (an acronym for four of the biggest tech stocks, Meta (FB) (formerly Facebook), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG )) of the week.
The e-commerce giant closed more than 13% higher on Friday after a fourth-quarter 2021 earnings report showed revenue gains and an $11.8 billion profit from the Rivian (RIVN) investment. , an electric vehicle company that recently went public.
Net sales increased 9% in the fourth quarter of 2021. The company ended the year with net sales of $469.8 billion, an increase of 22% over 2020.
After hours trading on Thursday, AMZN rallied, accelerating past 14% and extending those gains into Friday. The rally marked the company’s biggest one-day gain since 2012.
Prior to this most recent rally, the stock had fallen double digits since approaching record highs in November. A strong performance from Amazon Web Services (AWS) in the fourth quarter of 2021 was a crucial aspect of the rebound, according to the BofA report.
“AWS growth accelerated by 1 pt [quarter-over-quarter] at 40%, closing [the] gap with much smaller peers,” the report notes. In this regard, AWS beat competitors like Microsoft’s Allure and Google’s GCP, neither of which saw positive growth. Growth margins of 29.8% also beat Bank of America’s expectations of 29.5%.
“The strong performance was attributed to investments in the sales force as Amazon tackles businesses large and small,” the report explained. “We now estimate AWS at over 50% of the total company value in our SOTP [sum-of-the-parts valuation], with rev. growth adding $200 billion in market capitalization in 2022.”
Notably, Amazon announced that it will increase the cost of Amazon Prime subscription from $12.99 to $14.99 for monthly subscribers and from $119 to $139 on an annual basis. The report acknowledges that the higher costs associated with labor shortages and inflationary pressures are problematic, although Amazon remains confident that they are up to the challenge.
“As expected over the holidays, we saw increased costs due to labor shortages and inflationary pressures, and these issues continued into the first quarter due to Omicron,” said Andy Jassy, CEO of Amazon. “Despite these short-term challenges, we continue to be optimistic and excited about the business as we emerge from the pandemic.”
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.
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