Amazon surges 14% after earnings?How deep is the Prime moat
Authors study club data support | | us equities hang up big data (www.gogudata.com) on February 3, after amazon quarterly earnings, originally by Meta BaoLei, factors such as the European central bank to turn the eagle fell 8%, but after the earnings release miracle line up 18%, what’s the lowdown on this?According to the earnings report, Amazon’s 21Q4 revenue was 137.4 billion US dollars, up 9.5% year-on-year, smaller than the expected 137.7 billion MISS;Operating Income of $3.5bn vs forecast of $2.4bn, Operating margin of 2.5% vs forecast of 1.8%.The results were generally not very bright.First of all, in terms of revenue structure, product revenue of $71.4 billion vs $71 billion in the same period last year barely grew. The revenue growth was mainly driven by services (cloud computing AWS, which will be analyzed separately later), and AWS growth was actually within expectations.Operating profit was higher than expected, but that had something to do with lower expectations – operating profit of $3.5 billion in the fourth quarter compared with $6.9 billion in the same period last year.And while net income and EPS were higher than expected, this was largely due to a one-off gain ($11.8bn) from Rivian, which the market didn’t much care about, or that drove the share price up 18%.Moving on, the key is the Prime fee.(2) Prime: The hidden king strike option spurred amazon’s stock rally by raising the price of Prime membership from $119 to $139 (the last time it was raised was in 18 years, and the last time it was in 14 years, in a four-yearly paradigm).Why does the market value this so much?Amazon Prime value splitMorgan divided the services included in Prime membership into six parts, including contract performance (free delivery and high validity), streaming media, games, music and books, and then compared them with their competitors. It can be found that Almost every item of Prime provides higher value than their competitors, but the price of the split is much lower than their competitors.The overall value/price of Prime is 8.5X, which means that there is a very strong price increase option — if the price is raised, there is no need to worry that consumers will not buy it, because the service enjoyed is indeed too cost-effective and keeps improving — Amazon has invested a lot in infrastructure such as warehousing and logistics every year.It also expands other entertainment value-added services through acquisition (such as MGM Mirage), which means that the value of Prime is also constantly improving and the business model forms a positive cycle.It is difficult to copy and catch up with the competitive advantage that shapes so.For example, amazon currently provides 10 million + products in one day and about 100 million + products in two days.The amount of goods on 1 day has increased 10 times since 2018 — continuous investment has deepened the moat (Walmart only delivered 2 million goods on 2 days).Structurally, there are about 240 million subscribers, including 92 million in the United States — the increase mainly comes from overseas markets. In the existing 20 overseas markets, Prime penetration rate is about 16%-28% (overseas TAM is about 723 million), and the penetration rate of overseas members is about 75% in the United States. There is still a large space for overseas member penetration rate.It can be seen from the data that Prime has maintained a high growth rate overseas and surpassed the local market in 18 years.Compared with other subscription services, amazon’s growth potential for more – high growth, high scale as follows: compared with 20 netflix subscribers 208 million, 14% growth, Prime subscription has up to 34% of the 200 million growth (have epidemic fueled a big wave factors, eliminate this factor growth also hit, Morgan subsequent growth is expected to close to 20%).In summary, Prime is a good ecosystem, growing fast and steadily, and there is still plenty of room for price increases — the option will eventually cash in again, but we don’t know when.But believe me, it’s better than a stock split.We can understand this system as follows: 1. Offer value far beyond price, and the market recognizes this, so there is always an option to raise the price (once every 4 years in the past);2. Consumers also recognize this. Currently, there are about 240 million members, and there is still a large room for growth.3. Strong sustainability and certainty of operation, which can give a higher valuation premium;4. Put that logic together: raising prices by $20 increases revenue by about $5 billion a year. It’s not too much to give PS 20x, which is a $100 billion increase in market cap.(3) AWS: as the main driver of growth, the growth rate is within the expectation. AWS ‘revenue is 17.8 billion, which is in line with the expectation of 17.3 billion, up 39% year on year.Until Amazon, the three cloud giants (Amazon, Microsoft, Google) have all reported earnings, among which Microsoft and Google cloud business growth of around 45%.In this volume, the three giants still have such a high growth rate, which intuitively reflects the vast tide of enterprise cloud, here also have to admire The vision of Bezos, bet on performance, Prime and cloud, let Amazon continue to be strong for more than 10 years.As for the solid growth of cloud computing in the big three, another important point is that it will maintain the prosperity of upstream chip players (such as Nvidia, AMD), which will help drive their stock price rebound.(4) Amazon guidance 22Q1 revenue 1122-117 billion yuan, 3%-8% year-on-year, VS market expectation 120 billion yuan;Operating profit of 3 to 6 billion vs 6.35 billion market estimate.Based on the median revenue guidance of $114.5 billion, it missed the forecast by about 5%, which was also a major factor in the stock’s decline.Note: this article by the United States stock study association team original, reproduced please indicate the source, thank you!