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Amazon’s Value Surpasses Wal-Mart After Surprise 2Q Profit

MAE ANDERSON, AP Technology Writer

 

NEW YORK (AP) — It’s official: Amazon is bigger than Wal-Mart.

Amazon
shares surged 15 percent on Friday after the e-commerce powerhouse
reported a surprise second-quarter profit and a better-than-expected 20
percent jump in revenue.

The sharp increase in shares brought Amazon’s market value to $259.1 billion, more than its biggest rival, Wal-Mart Stores Inc., signaling a sea change in retailing. Amazon, which just turned 20, is now valued higher than the world’s largest retailer.

Bentonville,
Arkansas-based Wal-Mart Stores is valued at about $231.7 billion. The
company, with 11,767 stores worldwide, still has much higher sales,
$485.65 billion in the year ended Jan. 31, compared with Amazon’s $89 billion in annual revenue last year.

But investors applauded Amazon’s ability to keep costs in check while growing its revenue. Amazon
credited the profit to continued strength of its cloud-computing
business and strong revenue growth both domestically and abroad. That
came as it held costs for marketing and package delivery in check.

A
company’s market value is calculated by multiplying the number of
shares of stock it has in circulation by the current price of one share.

It
was the second usurper in two months to Wal-Mart’s value. Last month
Facebook became more highly valued than the world’s largest retailer,
knocking it out of the top 10 list of the highest-valued companies in
the Standard & Poor’s 500 index.

Amazon is firing on all cylinders, analysts said.

“When
it is good, it is great: particularly as the business shifted to higher
growth across a matrix of operating segments, product categories, and
geographies in the second quarter,” said William Blair analyst Mark
Miller. He said a variety of Amazon’s units boosted results: its $99 annual Prime membership, third-party sellers, and its logistics and delivery capabilities.

“In view of the sharply higher preopening stock price, the question is whether this is as good as it gets,” he added.

Amazon
Web Services, the Seattle company’s cloud-computing business, was
another standout, with revenue that jumped 81 percent to $1.82 billion.

“AWS was particularly robust,” said Cantor Fitzgerald analyst Youssef Squali. “We believe that Amazon
is now starting to move away from the heavy build years for its
ecommerce business just as its top line accelerates, yielding the
beginnings of the much sought-after margin leverage.”

Shares rose $72.08, or 15 percent, to $554.26 in midday trading. The stock had been up 35 percent in the past 12 months.

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