Oct. 23 (Bloomberg) -- Amazon.com Inc., cited a decade ago as an example of an overvalued dot-com stock, rose to a record in Nasdaq trading today after third-quarter earnings trounced analysts’ estimates.

The world’s largest online retailer climbed $25.04, or 27 percent, to $118.49, a day after reporting a 69 percent jump in profit and a 28 percent gain in revenue. The shares have more than doubled this year.

Chief Executive Officer Jeff Bezos, a former hedge fund vice president who started Amazon.com more than a decade ago, has expanded the site’s array of products, pushed into international markets and introduced the Kindle digital reader. Amazon.com’s growth prospects look “as impressive as ever” and the company will continue to take sales from rivals such as EBay Inc., said Fred Moran, an analyst at Benchmark Co.

“Amazon proved it was the best of breed among the Internet companies as many fell by the wayside,” said Moran, who is based in Boca Raton, Florida. He rates the shares hold and doesn’t own any. “I’m truly amazed at how the growth prospects look for such an already large and fully established company.”

Profit Surge

Third-quarter net income increased to $199 million, or 45 cents a share, from $118 million, or 27 cents, a year earlier, Amazon.com said yesterday. Sales jumped to $5.45 billion. Analysts had estimated profit of 33 cents a share and sales of $5.04 billion.

“This level of outperformance was unexpected,” said Sandeep Aggarwal, an analyst at Collins Stewart LLC in San Francisco. He rates the shares hold and doesn’t own any. “They are doing everything right.”

Amazon.com, which sold shares to the public in 1997 and didn’t turn an annual profit until 2003, said the Kindle electronic reader is now its most popular product, both in terms of unit and dollar sales. Even amid the worst recession since the 1930s, consumers have snapped up gadgets such as the Kindle and Apple Inc.’s iPhone, fueled by the proliferation of digital content, said Benchmark’s Moran.

Consumers in the U.S. plan to spend an average of $222 on electronics this holiday season, up 8 percent from last year, according to the Consumer Electronics Association in Arlington, Virginia.

Sales Forecast

Amazon.com said sales in the fourth quarter will rise to between $8.13 billion and $9.13 billion. That compares with the $8.19 billion predicted by analysts. Operating income will be $300 million to $425 million in the period, the company said.

“You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” Chief Financial Officer Tom Szkutak said on a conference call.

This month, Amazon.com unveiled an international version of its $259 Kindle. The company also is trying to get its e-books onto more devices. Yesterday, Amazon.com introduced a program that lets consumers read Kindle books on personal computers.

The Kindle has about 60 percent of the e-reader market in the U.S., according to Forrester Research Inc. in Cambridge, Massachusetts. Sony Corp.’s e-reader ranks second with 35 percent. Barnes & Noble Inc., the largest U.S. bookstore chain, introduced a device this week that competes with the Kindle.

Walmart Looms

Amazon.com is facing mounting competition with Wal-Mart Stores Inc., the world’s largest retailer. After Bentonville, Arkansas-based Walmart cut the price of books by best-selling authors to $9 in the past week, Amazon.com matched the offer. Target Corp., the second-largest U.S. retailer, followed with a similar price cut. The American Booksellers Association asked the Department of Justice yesterday to look into “predatory” pricing practices at the companies.

“It’s a great September quarter,” said Colin Gillis, an analyst at Brigantine Advisors, said on Bloomberg Television. “They definitely blew it out on both the top line and bottom line. The concern is that Amazon is stuck in a price war here.”

About 30 percent of Amazon.com’s sales come from third- party merchants who sell on the site. That puts the company in competition with EBay, the most-visited U.S. online marketplace.

EBay gave a fourth-quarter profit forecast this week that missed some analysts’ estimates, sending the stock down 4.2 percent yesterday. EBay is building up its PayPal and Bill Me Later payment services, which carry lower profit margins than other parts of the business.

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

Last Updated: October 23, 2009 16:11 EDT