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Shares of Amazon ( AMZN) are up 46% this year and they might rise even more as the Internet retailer targets business customers and takes market share from rival eBay ( EBAY).

"Buy"-rated Amazon has been out front with consumers, rolling out a new version of its Kindle digital reader and a new shopping application for BlackBerry users this year. But behind the scenes, the Seattle-based company has been expanding and upgrading its data storage and tech services for businesses.

TheStreet.com Ratings

In the past year, Amazon has diversified its revenue stream and undercut the strongest brick-and-mortar retailers. We expect strong stock performance in the quarters ahead as recession-weary consumers seek bargains online and the company expands into potentially more profitable markets.

Amazon, which announces first-quarter earnings next week, has been pushing its less-flashy data storage and e-commerce services to companies such as Target ( TGT ) and Timex. The services allow companies to use Amazon's technological resources to store data and power their Web sites. Management, led by founder Jeff Bezos, has been pitching these services as a way for businesses to cut costs.

The company's three-year-old fulfillment service has grown in the past year, shipping 3 million units in the fourth quarter, up from about 500,000 in the year-earlier period. This service allows outside sellers to hire Amazon to store, pack and ship their products. The business customers benefit from the shipping deals Amazon offers to consumers.

On the consumer front, Amazon has been expanding its "seller business," which competes with eBay's auction service. The number of active Amazon sellers rose 16% in the fourth quarter, outstripping eBay's 4% gain.

One could argue that Amazon attracts a broader array of shoppers than an auction-based company like eBay, which hasn't successfully expanded into fixed-price sales. Amazon's well-designed site has taken advantage of both markets, boosting revenue 18% to $6.7 billion in the fourth quarter.

Amazon also has remained competitive with the biggest discount retailer, Wal-Mart ( WMT), which has been trying to expand its online presence. The average price of Amazon goods fell 8% in the fourth quarter, helping it keep up with the low-cost leader.

Amazon registered more than 65 million unique visitors in March, up 0.74% from February, according to Compete.com. Wal-Mart's Web site registered 31 million unique visitors, but the gain was larger at 7.1%.

While Amazon's shares have advanced 46% this year, Wal-Mart shares have fallen 8.5% and eBay's have risen just 2.6%. The S&P 500 index is down 5.7%.

The company boosted its cash balance to $3.7 billion and halved its debt to $664 million during 2008. Operating margin, Amazon's principal weakness, deteriorated to 4%. Its margins could strengthen if the company continues to attract bargain hunters and business customers.

Amazon shares are expensive compared with those of other online retail competitors based on earnings, sales and cash flow. But the company is finding creative ways to increase revenue even as the weak economy forces consumers to spend less.

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