Novice Investing - Amazing Quarter for Amazon

Date: Monday 01st 2008f December 2008 04:39:01 PM

Amazing Quarter for Amazon - 04/26/2007

By: Novice Investing Staff

Amazon.com, Inc. (AMZN) the pioneer of online book trading, reported a blowout quarter this past week. Quarterly profit rose to $ 111 Million from $ 51 Million a year ago. At last, Amazon's past investment has borne fruit. It had invested more than $ 1 Billion during 2005 and 2006. One of such investment is Amazon Prime. Company officials pointed out that Amazon Prime helped drove sales in North America faster than its international division. In Wednesday trading, shares of Amazon was trading up 26% to $ 56.75 per share.

Quarterly sales was clocked in at $ 3.02 Billion, a 32% growth. Current fiscal year is now expected to produce revenue of $ 13.4 - $ 14 Billion. Meanwhile, profit is expected to top 91 cents per share. This gives Amazon a hefty forward price earning ratio of 60. Balance sheet of Amazon.com cannot be considered flush with cash as well. It has roughly equal amount of cash and long term debt.

Going forward, no doubt, Amazon had transformed the ecommerce industry with its business model. Amazon started out as an online book seller and branch to other segments such as CD, Electronics, Personal Computer and further into auction, marketplaces. Other online book sellers such as Barnes & Nobles and buy.com, for example, are having a hard time to catch up with Amazon in term of service and customers base.

Amazon's success was not without pain, however. In the early part of the decade, Amazon was incurring heavy losses due to the business investments and infrastructures it made and the need to sacrifice short term profit for longer term competitive advantage. Now, as its investment had paid off, Amazon shares soars to 52 week high, valuing it at $ 23.4 Billion.

Is Amazon overvalued? Conventional valuation says so. But shares move upwards, anyway. As long as Amazon can continue to grow revenue and profits exceeding analysts' expectation, you can expect the run up to continue.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Amazon.com Inc. (AMZN) or any other securities.

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