Amazon shares shoot to record levels

  • 25/07/2015
(Reuters)
(Reuters)

Amazon shares have shot to record levels after a blowout earnings report seen as a potential watershed for the US online giant.

In early trades on Friday, Amazon leapt 14.5 percent to US$555.17 (NZ$843.98) a day after reporting a surprise profit, fuelling hopes that the company's array of big investments is finally paying off.

"After questioning the investment rationale for years, Amazon is seeing the fruits of its labours in both revenue growth and operating margin," said Deutsche Bank analyst Ross Sandler in a note to clients.

"Few mega cap consumer internet companies can sustainably demonstrate accelerating revenue and margin expansion at the same time, and when it happens, it's a magical trend that rightfully gets rewarded."

Amazon's shares have doubled since hitting lows last October on pessimism over its profit outlook, and Friday's surge put its market capitalisation at more than US$250 billion, overtaking the brick-and-mortar retail leader Wal-Mart.

The US e-commerce giant, which is also a major player in online video and cloud computing, on Thursday reported a net profit of US$92 million while revenues jumped 20 percent from a year ago to US$23.18 billion.

The company founded by Jeff Bezos 20 years ago has been known for investing in long-term projects with little concern for short-term profits, but some of those investments appear to be paying off.

"We believe that Amazon is now starting to move away from the heavy build years for its e-commerce business just as its top line accelerates, yielding the beginnings of the much sought-after margin leverage," said a note from Cantor Fitzgerald's Youssef Squali.

AFP

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