Amazon.com, a survivor of the dot-com era, is quickly becoming a technology powerhouse in the new economy.
Shares of the online retailer reached a record high last Friday—soaring by 27 percent, or $25.04—to reach $118.49, after reporting impressive third-quarter earnings a day earlier.
Amazon’s Kindle e-book reader has gained immense popularity since its launch and its now in its second incarnation. Aided by Kindle sales, which the company said was its most popular product, the Seattle-based company reported third-quarter net income of $199 million, or a 70 percent increase from the prior year.
Its revenues and profits both exceeded analyst expectations, and its projections for the fourth quarter—including the 2009 holiday shopping season—was equally strong.
On Friday, investors took in all the good news and drove up its shares (Nasdaq: AMZN) by almost 30 percent, betting that Amazon.com would become the dominant online retailer in the post-recession economy.
“I’m truly amazed at how the growth prospects look for such an already large and fully established company,” said analyst Fred Moran in a Bloomberg interview. He also said that Amazon.com’s growth prospects look “as impressive as ever.”
Amazon.com became a public company in 1997 but did not turn a profit until 2003, nearly six years later.
Two years ago, Amazon.com—which began its business as a bookseller—realized that selling wares on the Internet was not enough. It quickly introduced the Kindle e-book reader and today boasts more than 360,000 books and periodicals.
The “newest Kindle is available to ship to customers living outside the U.S. Customers in more than 100 countries around the world and U.S. customers traveling abroad can take advantage of Kindle’s 3G wireless technology and download a title in 60 seconds or less,” said Thomas J. Szkutak, Amazon’s chief financial officer in a conference call with analysts last week.
Forrester Research estimated that the Kindle currently holds around 60 percent of the U.S. e-book reader market, with the remainder going to Sony Reader. Last week, rival Barnes & Noble introduced a competing e-book reader called NOOK, priced at $259.
The company is also seeing growth in Amazon Prime memberships. Prime members pay an annual fee and receive unlimited free shipping and reduced overnight shipping options.
The growth of Prime has been particularly strong in overseas markets, the company said.
“When we look at the international Prime programs, not only in Japan but also in Europe, we are seeing similarities in terms of subscriber growth as well as renewal rates,” Szkutak continued.
Amazon.com predicted that fourth-quarter sales will be between $8.13 billion to $9.13 billion.
“You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” Szkutak said.