Why Amazon stock gained 12% in April

Shares of the tech giant gained on a strong earnings report and optimism about the broader economy.

| More on:

Image source: Amazon.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Amazon (NASDAQ: AMZN) were climbing last month after the tech giant posted strong first-quarter earnings at the end of the month and benefited from a broader rally in early April.

According to data from S&P Global Market Intelligence, Amazon shares finished the month up 12%. As you can see from the chart below, the stock gained steadily over much of April.

AMZN Chart

AMZN data by YCharts

So what

Amazon shares surged early in the month, riding higher on news about Biden's $2.3 trillion infrastructure plan, a strong March jobs report, and the defeat of a unionization drive at an Alabama warehouse. (Votes against unionizing outnumbered votes for by more than 2-for-1.)

As the leader in e-commerce and cloud infrastructure, Amazon is in a great position to benefit from the passage of an infrastructure bill that would improve roads, helping make deliveries faster, and expand internet access. As a retailer, the company should also benefit from the economic reopening, which is already driving consumer spending higher.

Towards the end of the month, the stock gained in tandem with blowout results from other tech stocks, pointing to strong growth at the company in digital advertising and cloud computing.

Amazon itself posted smashing results in its Q1 report with revenue up 44% to $108.5 billion, outpacing expectations at $104.6 billion, and saw earnings per share more than triple to $15.79, easily beating estimates at $9.54. The company's profit margins continue to expand rapidly due to growth in businesses like advertising, third-party seller services, and cloud computing.

Now what

Looking ahead, the company expects another round of strong growth in the second quarter, calling for $110 billion to $116 billion, or 27% revenue growth at the midpoint. Though Amazon may face some headwinds from the reopening as shopping habits trend away from e-commerce, the company now has more than 200 million Prime members. Over the last year, it has invested more than $45 billion back into its business in areas like logistics, which will only reinforce its competitive advantage. 

Expect its profit margins to continue to expand as its high-margin businesses keep growing.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

electric vehicle such as Tesla being charged at charging station
International Stock News

Why did the Tesla share price just tumble 7%?

Nasdaq investors just sent the Tesla share price sharply lower.

Read more »

A woman is excited as she reads the latest rumour on her phone.
Broker Notes

Goldman Sachs says this US stock is replacing Tesla in the Magnificent Seven

And no, it's not a tech company. It's in the healthcare sector.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Should I buy Nvidia stock as an Australian investor?

Many Aussies are thinking of jumping on the bandwagon, but they need to think about these issues first.

Read more »

Digital rocket on a laptop.
Broker Notes

Is the Nvidia share price on course to reach US$1,400?

You betcha, says one analyst.

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Could Nvidia become the most valuable stock on earth?

Can anything stop the Nvidia stock price?

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
International Stock News

What can ASX investors learn from Warren Buffett's latest buys and sells?

We've just found out what Buffett's been buying and selling recently.

Read more »

electric vehicle such as Tesla being charged at charging station
International Stock News

Why Tesla stock tanked in January

Will the electric vehicle leader see earnings decline once again in 2024?

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Will Nvidia stock be worth more than Microsoft by 2030?

The graphics giant has been growing at a much faster pace than Microsoft, but can it sustain that momentum?

Read more »