Amazon Bears Take Cover

It's a rough day for the Amazon(AMZN) bears.

On Tuesday, the company announced first-quarter results that blew past analyst estimates while lifting its guidance for the year. It also reported improving operating margins and said that the rate of its spending growth on technology and content in 2007 would be slower than the year before.

The blowout quarter caught Wall Street flatfooted. Shares soared nearly 25% to $55.53 in recent trading on Wednesday.

While it is by far the best-performing big Internet stock of the year, Amazon tends to be among the least liked by analysts and investors. Before Tuesday's earnings announcement, only seven analysts recommended buying the stock while 10 had a sell rating on it. And investors were short 15% of the company's outstanding shares in May -- well over twice the rate of Yahoo!(YHOO), the second most shorted big Internet name.

Investors covering their short positions no doubt helped fuel Wednesday's rally. Amazon also forced bearish analysts to backpedal and elicit a round of upgrades. One came from investment bank Piper Jaffray, which had downgraded the company just Monday.

A $50 price target that represented the height of analyst predictions suddenly became too bearish even for Amazon skeptics. Goldman Sachs analyst Anthony Noto raised his price target 57% to $55 from $35, while rating the stock neutral. Goldman Sachs makes a market in Amazon shares.