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Amazon Investors Give CEO Bezos Room to Run

Shareholders wait for spending and acquisitions to pay off
Jeff Bezos
Jeff BezosPhotograph by Patrick Fallon/Bloomberg

Amazon.com’s Jeff Bezos has the kind of investors any chief executive officer would envy. While others must contend with restive shareholders who demand steadily increasing profits or bigger dividends, Bezos has nearly free rein to pursue his strategy of ignoring earnings and spending heavily to expand into new businesses. The stock is up more than 40 percent over the past 12 months, and in March traded at more than 700 times the previous 12 months’ earnings—the highest price-to-earnings ratio of any company in the Standard & Poor’s 500-stock index. It had held that ranking for nine months, losing it only after announcing a loss of $39 million for 2012, which made calculating the p-e ratio pointless.

Founded by Bezos in 1994, Amazon has evolved from an online bookseller into a peddler of everything from designer clothing to digital downloads of books, movies, and music. “Investors have shown a willingness to accept a rich valuation for a company that’s executing at a very high level and investing” in growth, says Tom Forte, an analyst at Telsey Advisory Group. They are betting that higher earnings will follow, he says.