Amazon.com (NASDAQ:AMZN) is back. Sure, one has to wander through some unsavory neighborhoods to see it. Take a wrong turn, and you'll wind up lamenting the dips in free cash flow and profitability. Instead, you want to start from the top.
Amazon grew its sales by 24% to $2.3 billion for the period. That's notable, since through the first half of 2006, net sales at Amazon grew by just 21%. More specifically, the second quarter's top line grew by 22% after moving 20% higher during the first quarter.
You may have heard me gush about the importance of accelerating growth in the past. As companies mature, their growth rates tend to gradually decline. But when you see such a company buck that trend, that's what we call accelerating growth. And you are seeing it with Amazon.
Amazon is looking for sales to clock in between 22% and 33% in the seasonally potent holiday shopping quarter, so there is a good chance that we will see the company's growth rate continue to accelerate.
Even if you want to dwell on the negative as you work your way down the income statement, keep in mind that Wall Street actually expected the company to record even less than the $0.05 per share that it ultimately earned. Amazon is investing in several products (such as its Unbox digital-delivery service), opening new storefront categories, and breaking into new technologies, so it was only natural that the company's bottom line would not keep up with its sales growth.
Amazon has come a long way. I remember hearing Overstock.com's (NASDAQ:OSTK) Patrick Byrne talk last year about how his company was priced unfairly relative to Amazon because Overstock was the faster grower. Well, Overstock's top line has grown by just 7% through the first half of 2006. Red Envelope (NASDAQ:REDE) was supposed to carve out a specialty niche in luxury retailing online, yet it, too, is growing slower than Amazon.com these days.
We can always argue about how many of Amazon's new investments will pay off in the future. I know that I can't be the only one curious to see how the company will do in toy sales over the holidays, now that Toys "R" Us is on its own.
I've never been a roaring bull when it comes to Amazon, since online retail sales of physical goods seem doomed to be a low-margin business. Yet now that sales growth is picking up and the company's making the move to digital delivery, we really might be at the point where Amazon's future will be grander than its colorful past.
Amazon has been recommended to Motley Fool Stock Advisor newsletter subscribers. To find out what other great companies are helping boost the newsletter to great returns, take a free 30-day trial. Overstock is a former Rule Breakers pick.
Longtime Fool contributor Rick Munarriz has been shopping online for about as long as Amazon.com has been in business. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
