Amazon to reap dividend from spending spree

Amazon.com’s days as the most expensive stock in the Standard & Poor’s 500 Index are numbered as chief executive Jeff Bezos reaps profit from an $18.5bn (€14.4bn) spending spree designed to spur growth.

Amazon, whose stock has almost doubled in three years, trades at more than 700 times earnings, the highest ratio of any company in the S&P 500 — a ranking it has held for nine months. As investments in digital content and cloud computing begin to pay off, that multiple is predicted to fall to 48 next year, making Amazon the 10th-most costly in the benchmark index, according to data compiled by Bloomberg.

Investors are betting on higher earnings as Amazon sells more movies, music and books for the Kindle Fire tablet and gets outside businesses to sell items from its storefront. Operating margin is projected to widen in 2013 after contracting for two years as it funnelled money into warehouses and improved its ability to deliver computing services over the Internet.

“Investors have shown a willingness to accept a rich valuation for a company that’s executing at a very high level and investing,” said Tom Forte, an analyst at Telsey Advisory Group. “There’s a belief that at some point, you’ll have a margin recovery.”

Seattle-based Amazon, founded by Bezos in 1994, has evolved from an online bookseller into a peddler of everything from designer clothing to toy drones, tablet computers and digital downloads of books, movies and music.

Amazon shares have soared 98% since the end of 2009, even as the company swung to a loss of $39m last year from $1.15bn in profit in 2010. Revenue surged 27% to $61.1bn in 2012 and may gain another 24% in 2013, according to the average of analyst estimates compiled by Bloomberg.

This has made Bezos the world’s 19th-richest person, worth $24.9bn.