Amazon Gets Its Props

Still, Piper analysts Safa Rashtchy and Aaron Kessler left open the possibility that Amazon can't sustain its higher margins -- a skepticism invited by Amazon's own reluctance to offer more specific data that could silence doubters.

"If the margins are indeed sustainable, then we will see continued improvements and a significant increase in profitability," the analysts wrote in a report. "On the other hand, if this is a one-time event, we will go back to margin fluctuations that have marked Amazon's performance over the past year or so." Piper has no underwriting relationship with Amazon.

Others were feeling more bullish on Amazon's future. Legg Mason analyst Scott Devitt suggested Amazon's strong quarter strikes a blow against the argument often heard among Amazon bears that the company is simply another retailer, and should be valued as such. Legg Mason has no underwriting relationship with Amazon, and the firm owns a 15.3% stake in the e-tailer.

"We believe the company has created a unique brand and brings a differentiated value proposition focused on creating a superior customer experience to the consumer," Devitt wrote in a report. "Amazon does this in a high-growth industry in which operating leverage is just beginning to show for the leaders."

Devitt's note urged a longer-term view that must have sounded soothing to Amazon executives. "There is a misconception in the investment community that companies should be focused on maximizing near-term profits," he said. "We believe quite the opposite and believe Amazon is just beginning to reap the returns on many well-placed investments, which should make happy those long-term shareholders that have believed in the process."

>To order reprints of this article, click here: Reprints