Amazon stock smashes decade-old record

Shares of Amazon.com hit a new all-time high Friday, a day after the Seattle company reported a 68 percent increase in its third-quarter profit and gave a better outlook than many analysts expected.

Shares shot up $25.04, or 27 percent, to $118.49, easily surpassing a decade-old record. Adjusted for three splits, the stock had previously peaked at $106.69 in the heyday of the dot-com boom.

Founder and Chief Executive Officer Jeff Bezos, with more than 94 million shares, saw his holdings jump by $2.36 billion Friday to $11.2 billion.

Amazon, which went public in 1997 and didn't turn an annual profit until 2003, now ranks second in the Northwest based on the total market value of its stock, $51.3 billion. It's well above Boeing, at $36.3 billion, but far behind Microsoft, $248.8 billion.

"It appears Amazon is continuing to gain market share at the expense of both its e-commerce and bricks-and-mortar competitors," said Hudson Square Research analyst Scott Tilghman, who raised his estimate of the stock's fair-market value to $142 from $113.

"It's still a challenging economic environment," so Amazon's range of products at different prices is an advantage, he said.

Amazon's quarterly profit surged to $199 million, up from $118 million a year ago, as sales rose 28 percent to $5.45 billion, the company announced Thursday afternoon.

Despite a still-shaky economy, Amazon predicted sales growth of 21 to 36 percent for the current quarter and an increase in operating income of between 10 and 56 percent.

That's a much different outlook than the National Retail Federation's projection for a 1 percent decline in holiday sales this year.

Even so, Amazon faces challenges on several fronts, including a price war with Wal-Mart.com and Target.com over popular new hardcover books by the likes of Stephen King and Sarah Palin.

The Web sites recently began selling the books for about $9, prompting the American Booksellers Association to ask the U.S. Department of Justice for an investigation into the cost-cutting race.

Also, new competitors are emerging to take on Amazon's Kindle electronic-reading device. Forrester Research estimates the Kindle enjoys a 60 percent share of the growing e-book market, compared with 35 percent for Sony Readers. This past week, bookseller Barnes & Noble unveiled a new e-reader called the "nook," matching the Kindle's $259 price tag for an entry-level version.

Mark Mahaney, who follows Amazon for Citi Investment Research in San Francisco, summed up his thoughts on the company's third-quarter earnings with a Friday morning report titled, "Bonfire! ... Thanks in Part to the Kindle."

Mahaney wrote that Amazon heads into the holiday season "fully armed" against shrinking bricks-and-mortar retailers with "one of the must-have gadgets," the Kindle. He rates the stock a "buy," with a target price of $140, noting that it's "taking (market) share hand-over-fist."

Meanwhile, Amazon's massive new headquarters complex in South Lake Union continues to grow. Amazon said it committed to lease another planned office building from developer Vulcan Real Estate.

Ten buildings totaling 1.37 million square feet are under construction. The new 12-story building, on Boren Avenue North between John and Thomas streets, will provide an additional 330,000 square feet.

Amazon previously agreed to occupy the building, but could have backed out and effectively put its construction on hold by paying a $10 million termination fee. Amazon and Vulcan representatives both indicated Amazon's commitment now is firm.

But construction has been pushed back a year — Vulcan said work won't start until 2011, and the building won't be finished until 2013. Neither company would explain the delay.

The rest of the headquarters complex is scheduled for completion in 2010 and 2011.

Seattle Times business reporter Eric Pryne contributed to this story. Information from Bloomberg News also was used.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com