Amazon Bears Take Cover

Noto wrote that the year could be particularly strong for Amazon given the mix of products hitting the market during the year. "We continue to believe that 2H2007 revenue growth should benefit from the favorable product cycle due to Harry Potter VII, strong video game sales and a blockbuster 3Q/4Q home video cycle with 11 sequel or franchise films being released in Summer 2007, thus yielding DVD releases in 2H2007," he wrote.

For the moment, Amazon bulls seem to be vindicated. "We continue to believe the market inappropriately focuses on Amazon as a low margin media (books, music, DVD) retailer," Stifel Nicolaus analyst Scott Devitt wrote in a research note on Wednesday. "We believe Amazon is a platform company with the capacity to grow significantly, not only with the media category, but in all categories of general merchandise retail and we believe the company retains real option value as a Web services and digital media business." Stifel Nicolaus makes a market in Amazon shares.

Still, Amazon remains a relative rarity among Internet analysts, with most of Wednesday's upgrades raising the company only to a hold rating. That puts it in a stark contrast with a company like Google(GOOG Quote). Widely loved on Wall Street and with high expectations built in, the search giant hardly budged after reporting its own blowout quarter last week.

But while Google's tendency to ignore Wall Street and do what it considers good for its business over the long term is widely noted, Amazon, too, may adhere to the principle. Amazon spent aggressively to grow its business by offering expensive promotions and continued to make costly investments even when it was derided for doing so by analysts.