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Amazon shares hit record after quarterly results

by FP Staff  Jan 30, 2013 03:31 IST

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SAN FRANCISCO (Reuters) - Amazon.com Inc (AMZN.O) shares hit a new record on Tuesday after the world's largest Internet retailer reported better-than-expected quarterly profit, fueled by growth of higher-margin businesses.

The stock jumped 11 percent to $288 in after-hours trading following its results. The stock hit a record of $284.72 in regular trading on January 25.

The Seattle-based company said operating income jumped 56 percent to $405 million in the fourth quarter, compared with $260 million in the fourth quarter of 2011.

"The fourth-quarter operating income was up more than expected," said R.J. Hottovy, an equity analyst at Morningstar. "This supports the bull case that Amazon can monetize its growth over the longer term."

Amazon mainly operates as a retailer, buying products at wholesale prices, storing them and then selling at a slight mark-up to consumers online. This is a low-margin business. However, the company has expanded into other businesses that are potentially more profitable, including cloud computing, digital content and acting as an online marketplace for other merchants.

These newer businesses are growing faster than the company's original retail operations, boosting profitability.

Morningstar's Hottovy said the increase in fourth-quarter profit was driven by a combination of growth in higher margin businesses, such as e-books, and a reduction in heavy fulfillment center investments Amazon has been making in recent years.

Amazon Chief Executive Jeff Bezos highlighted the company's Kindle e-book business, which he called a multi-billion dollar category that grew about 70 percent in 2012. Meanwhile, Amazon's physical book business grew about five percent in the same period, he noted.

"We're now seeing the transition we`ve been expecting," Bezos said in a statement.

The company also said fourth-quarter revenue jumped 22 percent to $21.27 billion as it grabbed a big share of online spending during the crucial holiday period. (Reporting By Alistair Barr; Editing by Bernard Orr)

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