Why Are Amazon Investors So Thrilled?

Amazon (NASDAQ:AMZN) headed into its fourth-quarter earnings report with the stock price trading near an all-time closing high of $283.99. Analysts were holding estimates for earnings of 27 cents per share, a giant leap from the 60-cents-per-share loss the company posted last quarter. Yet, despite these positive indicators, several watchers were worried about the Internet retailer’s earnings power, and some of those fears were materialized in the final results.

For the three-month period ended in December, Amazon reported that earnings fell by 45 percent. The company generated a fourth-quarter profit of $97 million, or 21 cents a share, on revenue of $21.27 billion. During the same quarter last year, the Internet retailer had earned $177 million, or 38 cents a share, on $17.43 billion in sales. The bottom-line results missed expectations.

“We’re now seeing the transition we’ve been expecting,” chief executive officer Jeff Bezos said in a statement accompanying the earnings report. “After 5 years, eBooks is a multi-billion dollar category for us and growing fast – up approximately 70 percent over last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5 percent. We’re excited and very grateful to our customers for their response to Kindle and our ever expanding ecosystem and selection.”