The betting before Amazon.com posted second-quarter earnings was that it couldn’t live up to the 80% uptick in its stock price so far this year. But the rising number of short-sellers who have been hoping for Amazon’s comeuppance took it in the shorts instead. Amazon’s stunning 257% jump in profits on a 35% rise in sales surprised even the bulls. Its stock is up almost 19% in the initial minutes after the market closed.
Of course, now Amazon’s price-to-earnings ratio is even higher relative to Google, Yahoo, and others than it had been. So at some point, cooler heads, like the ones that knocked the stock down more than 3% before the report, may prevail.
Still, the interesting thing to me is not just that its core retail business is finally paying off. Its Web services business hasn’t even kicked in yet, and no small number of folks think it has a chance eventually to be the big business CEO Jeff Bezos is hoping. So while Amazon at some point may well return to its customary pattern of disappointing investors with pricey new investments that catch Bezos’ fancy, the long-term outlook (if not the short-term stock valuation) looks pretty bright.