What's good for online retail is good for

Amazon.com

(AMZN) - Get Report

. This simple and seemingly widespread belief helps explain why shares in the Seattle-based bellwether are up over 70% since November.

But Wall Street analysts aren't buying it. None raised earnings or salesestimates for the company in December, according to the ILX database, and at least two brokerages -- McAdams Wright Ragen and Wells Fargo Securities -- have downgraded the stock because of the jump in share price.

After years of giving the money-losing company the benefit of the doubt, some analysts have grown super-skeptical about Amazon. And there's plenty to fuel their doubts.

On the one hand, a slew of data and press reports have suggested onlineretailers had a bang-up holiday season, and investors have reacted bybidding up Amazon shares. Overall online spending increased 10% in Novemberand an estimated 15% to 25% in December, according to research firm Nielsen/NetRatings.

That doesn't look bad when you consider that sales at bricks-and-mortarretailers are expected to have edged up just 2.2% for the fourth quarter, according to estimates published by the National Retail Federation.

Yet the online growth rate was much lower than Nielsen/NetRatings' projection of a 43% rise in November and December, according to Sean Kaldor, an analyst at the research firm.

Online holiday sales were "definitely not that great," says Scott Reamer, who covers Amazon for S.G. Cowen. "To me, it's a real head fake. Other retail stocks move on macroeconomic retail trends because they are already profitable." (Reamer has a neutral rating on the stock, and his firm does not have a banking relationship with Amazon.)

A Rough Path to Profitability

Even if overall online growth was good for Amazon's top line, that may be small consolation for a company trying to eke out its first profit.

"It is no longer about revenue growth," Reamer says. "The hard work isnot necessarily in the top line, it is what's below it."

The company is expected to report its fourth-quarter earnings on Jan. 22,and most on Wall Street expect revenue growth of zero to 10%. That wouldequate to about $1 billion in sales, according to analysts surveyed byThomson Financial/First Call. Amazon

ratcheteddown guidance when it reported third-quarter results in October.And Wednesday, the company said in an email distributed to Wall Streetanalysts that it will not preannounce results.

A year ago, Amazon said it would break even on a limited, operating basis, for the first time in the fourth quarter of 2001. But when Amazon talks profits it means EBITDA, or earnings before interest, taxes, depreciation and amortization, a standard measure of cash flow on Wall Street. The company will still lose money using generally accepted accounting principles, or GAAP, for the foreseeable future.

Comparison Shopping

Analysts are also questioning whether the strong holiday sales reported byother online retailers graced Amazon as well.

AOL

TST Recommends

(AOL)

, for one, recently announced that shopping by its members jumped 72% in the fourth quarter.Yet much of that growth came from women's and teen's clothing, categories that Amazon does not currently handle, even through its partnerships with other retailers.

Yahoo

(YHOO)

and MSN also reported strong growth in online retail sales this holiday season, but those rises were coming off much smaller sales bases than Amazon's.

Amazon is doing little to unravel one of the biggest mysteries of the just-completed holiday retail season.

Unlike bricks-and-mortar retailers, Amazon doesn't release monthly sales data. The upshot is that investors have little information on which togauge the company's performance this holiday season. Instead, Amazon releasesits so-called Delight-O-Meter, a running tab of items sold during theholidays. By this measure, the company said items sold in the holidayseason -- between Nov. 9 and Dec. 21 -- rose to 38 million, compared with 31million in the year-ago period. However, this year the company includedgoods sold via its partnerships with other retailers such as

Toys RUs

(TOY)

and

Circuit City

(CC) - Get Report

, items that were excluded from last year's figure.

Kristine Koerber, an analyst at WR Hambrecht, says it's "not a trueapples-apples comparison, and not enough to get us excited about thestock." (She has a neutral rating on the stock, and her firm has had abanking relationship with Amazon.)

Still, a larger share of Amazon's sales coming from its partnerships will help the profit outlook because the margins are better. In the third quarter, for example, gross margins from its so-called services segment, which includes all its partnerships, were 59%, compared with 27% in its U.S. books, music and video business, its largest segment.

Despite analysts' lingering skepticism, concerns that Amazon

will fall short of sales projections in thefourth quarter have abated. In late November, figures provided by comScore,a research company that tracks sales at Amazon and sells its projections toWall Street clients, raised the prospect of a slight shortfall. However,Amazon was helped by a holiday shopping season that extended to Dec.21; in past years consumers had to shop earlier to get goods in time for Christmas.

"If so, the questions then become, what do margins look like, howeffective were the company's cost controls, and what is the outlook for2002?" says Eric Von der Porten, a money manager at Leeward Investments, whoowns put options on Amazon, essentially a bet the stock price will fall.