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Market Insights

Amazon rescues the Nasdaq!

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The Nasdaq was having a terrible time yesterday. Weighed down by Facebook’s awful results and subsequent performance, the tech index posted it’s worst day in over a year.

Amazon reported earnings right after the close and launched a Blue Origin rocket under the share price, soaring to a 17.5% gain in post market trade:

Nasdaq 100 Amazon

In sharp contrast to Facebook’s record $251 billion loss, this strong report could see Amazon add another $200+ billion right back into the index.

As one of the largest stocks in the index, Amazon’s gains drove a sharp rally in Nasdaq Futures:

Nasdaq 100

And it wasn’t just Amazon either. Snap & Pinterest also reported positive results. The knee- jerk reaction to Facebook’s poor guidance was to sell all social media companies, perhaps believing that they would be equally impacted by Apple’s privacy measures.

However, Snap’s Chief Financial Officer Derek Andersen highlighted how Snap’s advertisers had begun using new advertising measurement tools during Q4, and that parts of Snap’s advertising business were recovering from Apple changes quicker than they had anticipated.

In post-market trade, Snap rallied from $24.50 to $39 per share. Even though Twitter did not report earnings yesterday, their shares also recovered from the Facebook fire-sale low of $32.66, and rallied into the $37 handle.

Markets will now have to grapple with questions surrounding Facebook’s model. Is the firm uniquely affected by Apple’s measures? Is there an inability to adapt? Or perhaps their guidance is overly pessimistic?

However, the big story overnight is Mega cap Amazon.

Three major factors to highlight:

  1. Amazon Web Services grew by almost 40% over the quarter, hitting $17.78 billion in revenue and beating analyst forecasts of ~$17.37 billion. As one of Amazon’s main profit drivers, this will always be a key focus for the market.

  2. Advertising Revenues continue to increase. This section of the business was previously found in ‘other’, but it’s going from strength to strength, and now merits its own line in the reports. Advertising services grew by $9.7 billion during the quarter, taking the total to $31 for the year. Google is way ahead of the pack here, but the fast growth suggests Amazon could become a major player on the advertising battlefield.

  3. Amazon Prime Price Hike: In the US, the monthly price will increase from $12.99 to $14.99, and annual membership jumps from $119 to $139.

All of which paints a picture of a firm that continues to innovate, grow and expand into new areas, while consolidating their leading position in an established marketplace.

One thing to watch out for in the next earnings report will be the impact of their Rivian stock holdings. In the fourth quarter, Amazon’s holdings of the electric vehicle firm were valued based on a price of approximately $104 per share.

They’re currently trading at around $60 per share which would equate to a pre-tax loss in Q1. It shouldn’t surprise anyone, but will likely have an impact on the results if the price doesn’t recover.

Summing up, a stellar quarter for Amazon, and another wild swing for markets still trying to find their footing in 2022.

Not investment advice. Past performance does not guarantee or predict future performance.

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