Amazon Earnings Surge on Digital Sales

May 2, 2012 Updated: October 1, 2015
Amazon Introduces New Tablet At News Conference In New York
Amazon CEO Jeff Bezos is seen introducing the Kindle Fire tablet computer at a press event last year. (Spencer Platt/Getty Images)

NEW YORK—Amazon.com Inc. reported stellar quarterly revenues and earnings, sending its shares higher by 15 percent last Friday, the biggest one-day gain for the online retailer since October 2009.

Amazon has spent a lot of money recently in acquisitions and analysts have wondered if it would pay off. In recent quarters, the company had relatively flat earnings.

The company is attempting to transform itself from an online retailer to a technology conglomerate, which hosts websites, cloud storage, as well as offering other high-margin services.

Amazon improved on its revenues by 34 percent, to $13.2 billion, in the most recent quarter. Profits were $130 million, or 28 cents per common share.

Diving into the numbers, it looks like Amazon is profiting from digital sales the most. The company said its 19 percent increase in media sales could be attributed to demand for e-books, movies, and music, which are purchased through its Kindle Fire tablet.

The company’s stock surged to $226.85 per share last Friday, which is not too far off from its all-time high.

Some analysts have doubts regarding the high valuation of Amazon. The company’s forward earnings multiple is at 70, far higher than that of Google Inc. or Apple Inc.

But investors are clearly paying for potential at the moment, much like Apple a few years ago. The other hurdle for investors is that Amazon is hard to value, as there are no similar companies as a benchmark in the market. The company operates an online store selling everything from food items to electronics, while also streaming movies and music downloads, as well as other services such as cloud-storage.

Kindle a Big Draw

Coinciding with Amazon’s quarterly report, a separate report from market research firm comScore Inc. said that Amazon’s Kindle Fire tablet has a 54 percent market share among Android-based tablet computers.

We know Apple’s iPad is the market-leading tablet, but Kindle Fire has clearly taken the No. 1 title among Android-based machines.

The Kindle Fire, released last year, is far outpacing Android rivals such as Samsung Galaxy Tab with 15 percent market share, and Motorola Xoom with 7 percent.

Kindle Fire sells for $199 on Amazon, which is a lower price point than most tablets. The least expensive version of the iPad retails for $499.