For a company at the mercy of penny-pinching customers, Amazon is looking pretty good. In the past four months the stock has more than doubled, to 71.25 on Mar. 18 from a two-year low of 35.03 in mid-November, when investors sold the shares on concern yearend sales would slump.
Amazon shares are gaining as investors pursue the small number of companies they believe will withstand the current slump. The stock is also being propelled by hype over recent Amazon products. The speed of the rally, however, has some analysts concerned it may not last.
Many investors are looking for companies that continue to innovate while cranking out a solid performance despite the recession. Like Wal-Mart, Amazon is seen as a brand consumers believe provides good value. That’s helping Amazon grab market share and new customers even in the downturn, and positions the company to emerge even more strongly from the recession, analysts say. “Investors are paying a premium for companies that are beneficiaries of the current environment and also for management teams they can trust with high-quality earnings,” says Scott Devitt, an analyst at Stifel Nicolaus.
Few Promising E-Commerce Players
The hubbub about the Kindle e-reader is also pushing the stock higher, analysts say. The innovative device promises to create a new market for digital books, an opportunity the company is promoting by having CEO and founder Jeffrey Bezos barnstorm talk shows, ranging from the Today show to The Daily Show with Jon Stewart.
As attractive as Amazon’s management and product mix may be, some investors are rushing to purchase the shares because there is a dearth of alternatives. Amazon did prove its mettle by posting strong holiday results despite the dramatic falloff in traditional and online retail sales. Institutional investors also are snapping up Amazon stock because they need somewhere to park money, says…