Amazon: Bears Give Up; Stock Up 20%

Amazon (AMZN) shares were soaring yesterday after a big beat-and-raise quarter Tuesday night. And some notable bears are throwing in the towel.

At least three Street analysts who had Sell ratings on the stock backed away from their bearish positions yesterday morning. Citigroup’s Mark Mahaney went to Hold from Sell; Cowen’s Jim Friedland went to Neutral from Underperform; Pacific Crest’s Steve Weinstein went to Sector Perform from Sector Underperform.

Among the factors they cited: strength in books, music and video in both the U.S. and internationally, and better than expected gross margins.

Here’s the explanations from the reformed Amazon bears:

Citigroup’s Mahaney: A key part of our Sell thesis no longer holds - we thought AMZN had seen the likely end of margin boosts from third party sales…and we were wrong. Third party - aided greatly by international launches - reached record high 30% of total unit sales.

Cowen’s Friedland: We think fundamentals have stabilized, driven by (1) strong underlying consumer demand; (2) a broadening of inventory and product categories across all markets, which is driving near-term revenue growth; (3) an increase in the mix of high margin third party revenues, especially in international markets; and (4) a lack of near-term negative catalysts.

Pacific Crest’s Weinstein: Improved outlook prompts upgrade…we are raising our 2008 EPS estimate to $1.35 from 81 cents on stronger revenue growth, better margin and lower taxes. Although we consider AMZN fully valued, if management focuses on improving margin, we believe our EPS estimate could prove conservative.

Given that the bears sound bullish; you can only imagine how the bulls sound. They sound, er, really bullish. A small sample:

Mary Meeker, Morgan Stanley: 2007 could be a pivotal year for AMZN shares, as the company possibly moves from a momentum story to an accelerating revenue growth and expanding margin story. If the trends continue, our CDF valuation of $56 may prove conservative.

Scott Devitt, Stifel Nicolaus: The market inappropriately focuses on AMZN as a low margin media retailer…AMZN is a platform company with the capacity to grow significantly, not only with the media category, but in all categories of general merchandise retail and we believe the company retains real option value as a web services and digital media business…Raising target to $55 from $45.

Brian Pitz and Brian Fitzgerald, Bank of America: Raising target to $62 from $48. AMZN’s break-out quarter gives us confidence in our margin expansion thesis…we see continued leverage from increased global e-commerce share, reduced spend and incremental opportunities with web services.

There are more; almost every analyst on the Street raised estimates and price targets on the stock yesterday. But you get the idea.

Amazon yesterday was up $9.02, or 20%, at $53.77.

AMZN 1-yr chart: