Amazon.com has been here before.
In late 1999, Amazon's stock price vaulted into the triple digits, fueled by exuberance over the promise of e-commerce. But by 2001, slammed by the double whammy of a recession and the popping of the Internet bubble, the stock had collapsed back into the single digits.
Now, Amazon shares are back in the stratosphere, propelled this time by improved profit margins and swelling revenues.
On Tuesday the company announced a third-quarter profit of US$80 million, a threefold increase from the US$19 million it earned in the third quarter of last year. It reported sales of US$3.26 billion, up 41 percent from US$2.31 billion in the quarter last year.
In advance of the earnings report on Tuesday, Amazon's stock price gained 10 percent and topped US$100 for the first time since December 1999, closing at US$100.82. In after-hours trading the stock gave up most of those gains, trading around US$90.
concern
Scott Devitt, managing director of Stifel Nicolaus, a financial services firm, said investors might have been worried that Amazon would start to increase its spending next year.
"Expectations got ahead of themselves," Devitt said. "You have a stock that has gone from US$30 to US$100 in a matter of 15 months, and at some point you crossed fair value."
The company's strong results for the quarter can be partly explained by currency fluctuations and by the 2.5 million copies of Harry Potter and the Deathly Hallows that Amazon sold.
But investors and analysts are also encouraged by more enduring trends, like the migration of smaller retailers onto Amazon's network.
"Amazon's third-party business is on fire," said Scot Wingo, chief executive of ChannelAdvisor, which helps smaller retailers sell their wares on the Amazon.com site. "People that dipped their toes in the water with Amazon a year or two ago have really expanded their selection."
Unlike eBay, Amazon does not charge a listing fee for each item sold on the site. Instead it charges only a commission, taking a cut of about 10 to 15 percent cut of each sale. That allows sellers to experiment with all of their merchandise on Amazon and pay only when an item is sold.
Amazon beat Wall Street's quarterly estimates of US$3.14 billion in revenue and its own forecasts of US$3 billion to US$3.175 billion.
Mark Mahaney, the director of Internet research at Citigroup, said investors had generally been pleased by a slowdown in Amazon's investment spending at the same time that margins and revenues soared.
"EBay's margins are flat on the year, Google's are flat to down on the year and Yahoo's margins are flat to down," Mahaney said. "You go to Amazon and revenue growth is more than 30 percent, along with a margin expansion of 25 percent. Compound those two and you get earnings growth this year that is just dramatic."Amazon's investment in its own operations is still considerable: It spent US$181 million on what it calls technology and content development over the last three months. But the rate of that investment is slowing and the investments are starting to yield fruit.
DRM
Last month, the company introduced the Amazon MP3 digital music store to sell tracks without the anti-piracy technology known as digital rights management, or DRM. The music companies EMI and Universal are participating in Amazon's store, making the service a significant competitor to Apple's iTunes service.
In a conference call with analysts, Jeff Bezos, chief executive of Amazon.com, said the company was happy with early results from the store.
"We are getting terrific feedback from customers," he said. "Everybody loves the DRM-free format. Now the onus is on us to continue to convince music labels that this is a good way to sell their music."
This fall, Amazon is also expected to introduce an electronic book device and an online store where users can download e-books.
Another nascent but promising area for Amazon is its Web services business, in which it rents out parts of its computing infrastructure to other Web businesses.
More than making up for those developing businesses is the overall increase in e-commerce sales. The research firm Hitwise reported double-digit increases in traffic to Internet retail sites during the summer.
Amazon got the largest chunk of that traffic, with 11.5 percent of all visitors, followed by Wal-Mart, with 5.4 percent.
Amazon also raised its forecast for this year, saying it expected to take in US$14.3 billion to US$14.6 billion for the year.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from