Amazon (AMZN) hit a seven year high of $68.68, which puts it up over 50% for the last month. A number of investors on Wall St. think it has gone a bridge too far.
Citigroup raised its target on the company to $67, but the shares blew right past that. The bank likes the new Amazon music download service which does not require digital rights management, making its easier for consumers to use.
But, the increase in Amazon’s stock is more about investors’ enduring love affair with innovation than it is about last quarter’s earnings. The company’s most recent reported period was good. Revenue growth was solid, but the numbers indicated something else critical which was that Amazon was no longer spending itself into a hole with marketing and technology costs.
Amazon has become Google (GOOG) with new products that actually bring in money..Google began its business by selling search. Amazon began its by selling books. Google moved into a number of other businesses, and Wall St’s. concern is that photo-sharing, maps, and newspaper ad auctions are not businesses that make any money. Amazon, on the other hand, has added services including a TV set-top and MP3 downloads. It is much easier to see where the return will come from these.
The itchy genius of Amazon founder and CEO Jeff Bezos has been out of style for years. His plans for the company have appeared random to the outside world until it realized that he could combine some cost control with the introduction of new services that were likely to work. In some ways, the investing world has caught up to his vision. It has been there, for several years, waiting for some acceptance.
After taking on book sellers like Barnes & Noble and DVD sellers like Blockbuster, Bezos is now going after Apple (AAPL) in the video and music download businesses. As strange as it may seem, the price of Amazon’s stock indicates that the world thinks he may be successful.
Douglas A. McIntyre
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