Amazon.com Beats and Raises, Sending Shares Flying

Amazon.com reported strong first quarter earnings Tuesday after the bell, beating Wall Street's expectations and sending shares higher by nearly 13% in after-hours trading. Amazon also raised its full-year sales guidance to reflect the strength of its recent quarter and the expectation of continued earnings strength going forward. First-quarter net income more than doubled on improved electronics and clothing sales, as well as a lower tax rate, to $111 million, good for EPS of $0.26; sales jumped 32% to $3.02 billion. Consensus estimates were for EPS of $0.15 on sales of $2.92 billion. Amazon issued guidance that was to the Street's liking: revenue in the range of $2.7-$2.85 billion for the next quarter, annual sales of $13.4-$14 billion, and an operating income projection for the year of between $463 and $593 million. Analysts had been projecting revenue of $2.69 billion for Q2 and $13.37 billion for the year. The guidance given by Amazon assumes an annual growth rate of 25%-31%, slightly higher than the range predicted by analysts. The latest quarter saw a 12% increase in the number of items purchased versus the prior year period, as well as a 5% increase in traffic to its sites. Shares rose to $50.47, up $5.72 (12.78%) in after-hours trading.

Sources: Amazon.com Q1 2007 Earnings Call Transcript, Press Release, Wall Street Journal, Bloomberg, TheStreet.com, MarketWatch,
Commentary: Amazon.com: Long Term Growth In Web Services Ahead • Amazon's Ad Program Could Augment Revenue Growth • 12 Reasons for Amazon.com to Rise Substantially This Year
Stocks/ETFs to watch: Amazon.com, Inc. (AMZN). Competitors: Barnes & Noble Inc. (BKS), eBay Inc. (EBAY). ETFs: Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN)

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