Amazon.com Inc. (NASDAQ: AMZN) has reported its important fourth quarter earnings report. Operating income increased 56% to $405 million in the fourth quarter. The retailer of almost everything online generated $0.21 EPS and $21.27 billion in revenues. Thomson Reuters had estimates of $0.29 EPS on a sales gain of almost 28% to $22.26 billion in revenue. Back in October, Amazon gave guidance of $20.25 billion to $22.75 billion in revenue for growth of 16% to 31%.

For the quarter ahead, Amazon now sees sales of $15 billion to $16.6 billion with an operating result of -$285 million to a profit of $65 million. Thomson Reuters had the consensus of $0.34 EPS and $16.86 billion in revenue.

The move to Kindle is working. Jeff Bezos said that the company’s eBooks effort is a multi-billion dollar category for Amazon and growing fast. This rose about 70% last year, while Amazon’s physical book sales experienced the lowest December growth rate of only 5% after 17 years as a book seller.

Our question has remained around margins. Wall Street has taken the word of Jeff Bezos for well over a year now that the low margin is the price to pay now for advanced market share out in 2015 and beyond. Amazon’s operating margin rose to 1.9% in the fourth quarter. This compares to only 1.5% in the fourth quarter of 2011 and margin was -0.2% in the third quarter of 2012.

Amazon’s 52-week trading range is $172.00 to $284.72. This stock trades at close to all-time highs and it trades at over 150-times the year ahead’s expected earnings. After closing down 5.6% to $260.35, Amazon shares traded down initially but then traded up 7% to about $279 in the after-hours trading session.

If Amazon is going to be able to keep increasing margins, then its extreme valuations are going to be easier and easier for the company to explain. Amazon remains a growth story and the big question will be how this company shapes up in 2015 and beyond.

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