In the aftermath of Amazon.com's release of its Q2 earnings report Monday, several industry analysts believe that the e-tailer can make good on its prediction of year-end profitability.
The consensus is that Amazon (Nasdaq: AMZN) is pulling back enough on its growth strategy to reach its goal of profitability -- at least pro forma profits -- by the fourth quarter.
However, Bear Stearns analyst Jeff Fieler said that while this path makes sense for the corporation, investors and stockholders concerned with short-term valuation may get impatient.
"Amazon's report contains some bad news for bears, in that the company's solvency is now assured, given its long-term trajectory for growth," Fieler told the E-Commerce Times. "And also some bad news for bulls, in that revenue growth was down."
Goldman Sachs analysts, meanwhile, saw plenty of good news for Amazon.
"Amazon continues to deliver on all of the key operational metrics and balance sheet items we monitor -- gross margin, fulfillment costs, contribution/order, operational margin, inventory turns, and ending cash balance -- reinforcing our view of Q4 profitability," Goldman Sachs said in a report issued Tuesday.
By the Numbers
Amazon posted a quarterly pro forma operating loss of 16 cents per share, outdoing analyst expectations for a 22-cent loss. Amazon's net loss was $168 million, or 47 cents per share, down from a loss of $317 million or 91 cents per share for Q2 2000.
Amazon also reported $668 million in net sales for the three-month period ending June 30th, up 16 percent from the $578 million in net sales from the second quarter of 2000. However, the company's core segment of books, music and video grew only 1 percent, to $389.7 million.
Trimming Pays Off
Amazon has said that rather than concentrating on boosting sales, it has been focusing on cutting costs and improving its operating efficiency. Analysts attributed the results of Amazon's latest earnings report to the e-tailer's efforts on that front.
"In our view, Amazon's sacrifice of growth for profitability is prudent in order to build a framework to drive secular shareholder value while growth remains cyclical," Goldman Sachs said.
However, Bear Stearns' Fieler suggested that because Amazon is viewed as a growth stock, the reality for Amazon is that investors and stockholders expect to see revenue growth.
AOL Dollars Make Sense
AOL's $100 million investment in Amazon, also announced Monday, is being hailed by many as a strategically sound agreement for both sides.
Analysts at Goldman Sachs were bullish on the investment deal, saying that "AOL's investment is a significant credibility stamp for both Amazon's equity value as well as the importance of e-commerce and Amazon in the converging world."
While the AOL partnership gives Amazon a chunk of capital, however, some observers have suggested that it backs the e-tailer into a corner when it comes to making deals with AOL competitors.
All Systems Go
Despite the fact that Amazon stock has dropped 88 percent from its December 1999 all-time high of $113, Amazon.com chief financial officer Warren Jenson is optimistic.
"We continue to make progress toward reaching pro forma operating profitability in the fourth quarter of 2001," said Jenson. "This quarter, the U.S. was profitable on a pro forma operating basis for the first time, and this is our sixth sequential quarter of improved absolute pro forma operating results."
According to Goldman Sachs, as Amazon proves itself
and reaches pro forma profitability in Q4, the company will shift its focus
back toward revenue growth and will revisit its "land grab strategy."
Talkback: 
