Amazon (AMZN -0.34%) destroyed estimates once again in its latest earnings report.

The e-commerce giant has been one of the biggest winners during the coronavirus pandemic and its third-quarter results showed why. Revenue jumped 37% to $96.1 billion, sprinting past the analyst consensus at $92.7 billion and the company's own guidance of $87 billion to $93 billion. Its bottom-line growth was even more dramatic as operating income jumped 96% to $6.2 billion, well ahead of Amazon's forecast of $2 billion to $5 billion, while earnings per share nearly tripled from $4.23 to $12.37, crushing the average Street estimate of $7.41. Earnings per share benefited from $925 in other income in the quarter, mostly related to equity holdings in other companies and adjustments related to foreign currency. In the quarter a year ago, it had other expenses of $353 million.

In spite of the blowout earnings results, the stock did something surprising. It fell sharply, closing down 5% the day following the report. There was no clear reason for the sell-off, though it came along a broad slide in big tech stocks as the Nasdaq Composite lost close to 2.5% on the day. Investors seemed to believe that the sector had become overinflated even as earnings reports were mostly better than expected.

Still, for Amazon, the stock now looks about as cheap as it ever has. Here's why. 

A Prime Air jet inside a hangar

Image source: Amazon.

The breakeven days are long gone

As recently as 2014, Amazon reported a net loss for the year. For a long time, the rap on the company was that it didn't make profits because it reinvested so much money in growth initiatives like new warehouses, logistics operations, emerging technologies, and its cloud computing division, Amazon Web Services (AWS).

Several years later, many of those investments have paid off big time, and a number of its high-margin businesses have matured. AWS, for example, has generated $10 billion in operating income through the first three quarters of the year, or an operating margin of 30.5%. Other businesses, like third-party seller services, have also taken off as revenue in that category jumped 55% to $20.4 billion, and its "other" category, which is made up of mostly advertising, grew 51% to $5.4 billion. Meanwhile, categories that have long been loss generators, like international e-commerce, have turned positive, posting a profit of $407 million in the third quarter.

For the second quarter in a row, the company posted net income of greater than $5 billion. Though founder Jeff Bezos' long-term philosophy hasn't changed, it's clear Amazon has more profits than it needs to reinvest in its business and expand into new categories like healthcare.

What's also notable about the third-quarter report is that those bumper profits came in spite of additional expenses related to COVID-19 and a surge in shipping costs, which rose 57% to $15.1 billion, following 68% growth in the second quarter. Amazon also spent about $2.5 billion on COVID-19-related expenses in the third quarter as its testing capacity has now reached 50,000 tests per day and $7.5 billion in the first three quarters of the year, expenses that will go away when the pandemic ends.

Finally, the company added a remarkable 250,000 new employees, and recruiting, hiring, and training those employees comes with additional one-time costs.

Wall Street is cheering

Despite the stock slide, analysts almost uniformly cheered Amazon's results, with eight researchers raising their price targets on the stock, and another upgrading the stock from sell to hold. Only one analyst responded negatively to the report, as Oppenheimer's Jason Helfstein lowered his price target on the tech stock from $3,700 to $3,500, expecting increased fixed costs from the ramp-up in its fulfillment network after a vaccine comes out.

The ringing endorsements from analysts covering the stock means forward earnings estimates for Amazon are about to jump. Prior to the report, the EPS consensus for 2021 was $44.88, but that should rise to more than $50 as analyst adjust their forecasts, giving the stock a forward P/E of less than 50, about as cheap as it's ever been.

Its fourth-quarter guidance also shows no signs of slowing down as the company expects growth of $112 billion to $121 billion, or 28% to 38%, which compares to the consensus at $112.3 billion, though that number will likely move higher as well. Bottom-line guidance was typically conservative at $1 billion to $4.5 billion, which includes $4 billion in COVID-19-related costs. 

Amazon is now more profitable than ever and is poised for both the coming quarters and a post-pandemic future as the company will benefit from COVID-19 expenses rolling off, the weakening of brick-and-mortar retail competition, and recent investments in logistics infrastructure and other businesses.

After a stellar earnings report and with shares down about 15% from its all-time high, now looks like a great time to buy Amazon stock.