Online retailing behemoth Amazon.com topped quarterly revenue projections Thursday, putting investors in a hurry to go shopping for the company's stock.
Amazon reported 24% higher revenue of $17.1 billion during the third quarter, beating expectations by 2% on strong sales growth of everything from electronics to media. Investors promptly responded, pushing shares up more than 8% in after-hours trading.
"They're clearly doing a good job executing," says Thomas Forte of Telsey Advisory Group. "They have a lot of opportunity, and they are driving strong growth."
Investors' pleasure with the company's top-line growth overshadowed the fact that the company reported losing money during the period. Amazon lost $41 million, or 9 cents a share, during the quarter, which matched analysts forecasts for the period, says S&P Capital IQ. The loss during the quarter is less than the $274 million the company lost during the same period a year ago. "Revenue growth is more of a focus than is profitability right now," says Colin Sebastian, analyst at Robert W. Baird.
In the quarter ahead of the holiday season, losses were expected as the company invests to add fulfillment centers and to add content to its video streaming services, says Shawn Milne, analyst at Janney Montgomery Scott.
Investors were relieved that online consumer spending remains strong. Some investors feared shaky consumer confidence could be a problem for Amazon, fears that didn't manifest themselves in Amazon's quarterly results, Sebastian says.
While Amazon has been positioning itself as a provider of computer services to other companies, it remains largely a retailer. The Amazon unit that includes revenue it gets selling computer services to other companies grew 58%, topping the company's growth in product sales of nearly 20%, says Forte. Even so, Amazon still gets just 6% of total revenue from this unit, a small amount given the extent of attention some investors pay to it.
The company is also working to stay relevant as a seller of digital tablets and electronic readers, despite stiff competition from Apple's iPad, Microsoft's Surface and a bevy of devices running Google's Android operating system. During the quarter, Amazon released an updated version of its Kindle Fire tablet, called the HDX, which attempts to differentiate itself from lower-cost tablets running Google's operating system.
The company issued guidance that bodes well for the future. The company forecast net revenue of between $23.5 billion and $26.5 billion, marking 10% to 25% growth, vs. the fourth quarter of 2012. Analysts were calling for the company to report revenue of $25.9 billion in the fourth quarter, says S&P Capital IQ. Shares of Amazon rose $5.45, or 1.7%, to $332.21 during regular trading. Amazon's stock price already matches the median 12-month stock price targets of the 38 analysts covering the stock, says S&P Capital IQ.
"The stock will work as long as revenue growth remains strong," Milne says. "They're funding large new businesses."
Contributing: USA TODAY's Beth Belton