Why Amazon.com's Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online retail giant Amazon.com (Nasdaq: AMZN  ) were bounding ahead today, gaining as much as 17% in intraday trading after the company reported first-quarter results.

So what: Amazon's earnings spawned tens if not hundreds of articles over the past couple of days, so if you want details on the tiniest minutiae of the company's release, you can undoubtedly find that. But if you want to know at a glance why shares are soaring today, it's as simple as this: First-quarter results trounced Wall Street's estimates.

Net sales jumped 34% from last year to a total of $13.2 billion, versus analysts' average estimate of $12.9 billion. On the bottom line, earnings per share clocked in at $0.28, far outpacing the $0.07 that Wall Street was looking for.

Now what: The big question that's always surrounded Amazon still remains. Namely, with shares trading at 89 times expected 2013 earnings, is this stock vastly overpriced? That's a hot-button issue, and I'll let the two sides continue to play tug-of-war on it.

What seems clear, though, is that from a business perspective, Amazon is rocking. Profit fell from last year as the company continues to invest in growth areas, but sales are growing impressively for a company that's Amazon's size. The Kindle series of e-readers continues to dominate, and it sounds like the Kindle Fire is more than holding its own. Interestingly, the company is even doing well on competitors' platforms -- it noted that the Kindle app for Apple's (Nasdaq: AAPL  ) iPad is the No. 5 iPad app of all time.

Bottom line: Amazon shareholders have good reason to be happy today.

Want to keep up to date on Amazon.com? Add it to your watchlist.

The Motley Fool owns shares of Amazon.com. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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