NEW YORK ( TheStreet) -- I've said it before and I'll say it again: Valuation will always matter.But in the tech sector, a complaint about a high P/E ratio is like protesting the wetness of water. Then there are relative comparisons such as Apple's (AAPL) incredibly low P/E of 10 versus Amazon.com's (AMZN - Get Report) 3000.
While there's no denying Amazon is solid as any, and has arguably the best CEO in the business today, there's always been another concern: When will Amazon's bottom line matter and how long can investors afford such high premiums without meaningful profits? Coming off a lackluster third-quarter, Amazon answered this call in the fourth quarter. For the period ending in December, Amazon posted net income of $97 million, or 21 cents per share, on revenue of $21.27 billion. These results were much lower than analysts' estimates of 27 cents per share on revenue of $22.26 billion. What's more, on a year-over-year basis, net income dropped 45% -- hence the constant concerns about the bottom line.
However, revenue climbed 22% year over year, continuing its streak of sales growth that has now averaged 32% over the past six quarters. Nonetheless, Amazon still missed the Street's revenue estimates of $22.26 billion. So despite the holiday quarter expectations, Amazon missed on both the top and bottom lines. However, following the report, shares rallied up almost 10%. The Street loved that Amazon improved in the one metric for which it is often criticized -- profitability, and in particular operating margin. That overall margins arrived better than expected affirmed the company's ability to establish better competitive leverage.