Shares of Amazon.com Inc surged more than 18% in pre-market trading on Friday after the online retailer reported on Thursday an unexpected profit in the second quarter on the back of better-than-projected revenue.
The company said that net sales surged 20% to $23.18 billion in the three months ended June 30th, compared with $19.34 billion a year earlier. Excluding unfavorable currency swings, net sales rose by an annualized 27%.
And while Amazon typically operates near break-even as it reinvests profits into growing its business, the company showed that it can be profitable when scaling back spending as it reported a net profit of $92 million for the quarter, or $0.19 per share, from a net loss of $126 million, or $0.27 per share, a year earlier. This compared to analysts projections for a loss of 14 cents per share on revenue of $22.39 billion.
“They are showing investors that if they want to deliver profits, they can,” said for Bloomberg Michael Pachter, an analyst at Wedbush Securities Inc. “Amazon is a dominant online retailer, well on its way to becoming one of the world’s largest retailers.”
Second-quarter results received a strong boost by the increasing popularity of the Prime delivery service, which has been adding subscribers at rates “higher than weve ever seen,” Chief Financial Officer Brian Olsavsky said.
Rapid growth in Amazons cloud computing service (Amazon Web Services) also attributed to the upbeat performance as sales grew 81% from a year earlier to $1.82 billion, or about 8% of total quarterly revenue. This followed a 49% growth in the first quarter.
“The teams at Amazon have been working hard for customers,” said Jeff Bezos, founder and CEO of Amazon.com. “We unveiled Amazon Business, opened Amazon Mexico, launched Prime free same-day, rolled out our ninth Prime Now city, broke our Black Friday record with the first-ever Prime Day… continued to double down on our fastest growing geography — India, launched 350 significant AWS features and services so far this year (ahead of last year’s pace), introduced AWS Educate, and entered into agreements for new solar and wind farms — enough to exceed our 2016 goal of 40% renewable energy.”
The company has been heavily investing to secure its foothold and attract more customers as e-commerce competition intensifies. It declined to comment on its rivalry with other online retailers, such as startup Jet.com which officially debuted this week following months of testing to provide online shoppers an alternative to Amazon.
“We’ve had competition for 20 years now from some of the biggest names in retail and other areas,” Mr. Olsavsky said. “Were used to competition, but we focus on the customer.”
Amazon also provided an upbeat guidance for the third quarter, saying it expects net sales to grow by between 13% and 24% to a range of $23.3-$25.5 billion, compared to analysts median projection of $23.9 billion. It also pinned operating results at between a loss of $480 million and a profit of $70 million, compared to a $544-million loss in Q3 2014.
Amazon.com Inc settled 1.25% lower at $482.18 on Thursday on the NASDAQ, marking a year-to-date jump of 55.37% and valuing the online retailer at $224.54 billion. Boosted by the report, shares of the company soared 18.21% in pre-market trading on Friday to $570.00 by 09:44 GMT. According to the Financial Times, the 36 analysts offering 12-month price targets for Amazon.com Inc. have a median target of $499.00, with a high estimate of $600.00 and a low estimate of $400.00. The median estimate represents a 3.49% increase from the last price of $482.18.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
