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Amazon (NASDAQ: AMZN), simply put, had a quarter to die for, the kind that all shareholders have on their wish lists. The Q3 numbers, which were released on Thursday after the bell, speak for themselves. Net sales: up 28%. Operating income: up 62%. Per-share profit: up 67% to 45 cents. Free cash flow for the trailing twelve months: up 98%. Yep, Amazon's fundamentals seem to be heading in the right direction.
According to our earnings preview, Wall Street was on record as wanting to see 33 cents per share on the bottom line. Amazon's management did a fine job of supplying further evidence to the market that the company's online business model is not only here to stay, but that it should provide shareholders with a significant amount of value over time.
Shares of Amazon soared in yesterday's after-hours session as high as the balloon in that stupid stunt we've had to put up with all week, but believe me, this is no hoax. At one point, they were up 14.5%.
Where will Amazon close by the end of trading on Friday? Well, I'm writing this way ahead of the bell, but I have to assume that the market will be bidding shares higher during today's regular trading session. And after looking through the earnings release, I think the stock will be heading higher for months to come. One almost has no choice but to predict that Amazon will do well during the holiday season, even against tough competitors such as Wal-Mart (NYSE: WMT), Best Buy (NYSE: BBY), and eBay (NASDAQ: EBAY).
There are concerns, though. Let's think about them. We've got problems in the economy. Jobs remain a conundrum. Consumers could pull further back on their spending at any moment and without warning. The major indexes might cool down, also without warning. All of this could add up to the potential for bad timing when it comes to buying Amazon.
The trick is to have a long-term approach. Amazon has become the kind of company that you could comfortably buy high and then attack with a dollar-cost-averaging strategy to improve the cost basis. Years from now, true investors will probably be happy with the results.
The Amazon story goes beyond just Kindle. Amazon has become a dominant, blue-chip brand. It's been tested, and it has passed with flying colors. Call me a bull on this one.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
10-23-2009 @ 1:03PM
Iridium said...
and the insanity continues, up 24% in half a day???
The numbers were good but not that good when the stock was already trading at 60 times earnings. Now its trading at 75 times earnings.
Do the words overblown, overbought, or bubble come to mind? If they don't you might want to go check recent history.
Amazon is a $60 stock maybe. This tech insanity is just like the late 90s all over again. Apple a $285 stock like some are saying, really???
How can these companies ever return dividends to support stock valuations like this?