Amazon.com reported solid profits and earnings on Tuesday, January 29, 2013, sending the company’s common stock into record territory.
Amazon.com, the world’s largest online retailer, credits its cloud computing services, video content sales, e-book sales, and the holiday shopping season for its financially favorable quarter that ended December 31, 2012. The holiday shopping season was very good for internet retailers, most of which experienced a sharp uptick in sales and profits and fared better overall than their brick and mortar counterparts.
Looking at the statistics for the quarter, Amazon.com revenues jumped 22 percent to $21.27 billion. Profits, in percentage terms, increased even more rapidly, climbing to $405 million or 56 percent higher than the same quarter in 2011. The profit exceeded Wall Street estimates and helped push Amazon.com stock higher, inching closer and closer to the $300 mark- a price level never before seen by the Seattle- based retailer.
One factor that certainly aided the better-than-expected profits was the decline in shipping costs. Amazon.com invested in fulfillment centers and warehouses over the past few years and is now reaping the benefits. With shorter shipping distances to its customers, costs are kept to a minimum and profits improve.
Expansion of the popular Amazon Kindle continues to fuel profits as well. The sales of e-books have been through the roof in the past year, growing more than 70 percent and contributing strongly to the corporate bottom line.
Yet another promising segment for Amazon.com is its 3P business. This is an online marketplace designed for third party merchants and it witnessed a 40 percent increase in sales for the recent quarter end when compared to the same quarter in 2011. The 3P business is a high- margin segment because it is commission based and therefore carries virtually no cost.
Wall Street likes what it sees. Amazon.com common stock is priced around $277 in mid- day trading, approximately $85 higher than its $192.15 closing price one year ago, on January 30, 2012.
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