Amazon shares surge as it raises price of Prime membership

Amazon’s stock surged in after-hours trading on Thursday after announcing a 17 per cent price rise for its popular Prime membership scheme.

The company said the increase, from $119 to $139 a year, was due in part to a rise in “wages and transportation costs” in its logistics network.

Citing similar strains, the company forecast lower than expected sales of between $112bn and $117bn for the current quarter. Wall Street had been anticipating sales in excess of $120bn.

However, Wall Street reacted positively to the Prime announcement, sending Amazon’s share price up by more than 15 per cent in after-hours trading. It had ended the trading day down nearly 8 per cent, amid a broader rout in tech stocks sparked by a plunge in the shares of Facebook-owner Meta.

The increase in the price of the Prime membership comes into effect later this month, or in March for existing members. In last year’s fourth quarter, revenue from Prime memberships was $8.1bn, up 15 per cent year-on-year.

Amazon’s earnings showed strong growth in cloud computing, with Amazon Web Services reporting 40 per cent revenue growth year-on-year. Without cloud, the company would have posted an operating loss of $1.8bn.

Revenue for the current quarter was in line with Wall Street’s expectations, up 9 per cent on the same period last year to $137.4bn. Operating income took a heavy hit from increased staffing costs and other Covid-related pressures, down 49 per cent on the same period in 2020 to $3.5bn.

“As expected over the holidays, we saw higher costs driven by labour supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” said Andy Jassy, chief executive. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Overall, the company reported a net income of $14.4bn, which included a pre-tax valuation gain of $11.8bn from its investment in electric truck company Rivian, which went public late last year.

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