Amazon holiday sales jump as one-day shipping pays dividends, stock up 13 per cent

Amazon.com on Thursday posted holiday quarter results well above expectations as the expansion of its one-day shipping program came under budget and membership in its Prime loyalty club notched a 50 per cent rise in two years.

Shares soared as much as 13 per cent in after-hours trade, putting the online retailer back in the US$1 trillion market capitalisation club. If the share gain holds on Friday, it will be the biggest daily jump for Amazon since October 2017.

Amazon also forecast operating income of up to US$4.2 billion in the current quarter, down from US$4.4 billion the year prior. Still, that appeared to assuage investor concerns about Amazon’s continued spending on fast delivery, which could have erased windfalls from e-commerce, advertising and cloud computing sales.

“We’re past the worst in terms of the margin pressure from the one-day shipping initiative,” said Atlantic Equities analyst James Cordwell. That and the “massively overstated” concerns about cloud competition rebutted some of the biggest arguments against buying the stock, he said.

Amazon chief financial officer Brian Olsavsky told reporters that additional investment in one-day shipping came slightly under the US$1.5 billion the company had forecast for the fourth quarter, despite more customer orders. Extra costs in the current period will be about US$1 billion for the delivery effort, he said.

Olsavsky added that spending on video would rise going forward, but the company was still determining its overall level of investment for 2020.