By Sebastian Herrera 

Amazon.com Inc. shares jumped 7.4% Thursday, reflecting the company's transformation from an upstart famously uninterested in profits into a giant that generates abundant cash, but fell 8 cents short of ending the day with a trillion-dollar market valuation.

The Seattle company spent much of Friday above that milestone but closed with a total value of $999.96 billion after negative sentiment prompted a late-day market selloff. Still, broad investor enthusiasm remains for Amazon, suggesting the company is poised to cross that threshold and stay there along with other giant tech companies.

Apple Inc., Microsoft Corp. and Alphabet Inc. each have market values exceeding $1 trillion.

Amazon surged even on a challenging day for Wall Street after releasing results showing it had surpassed retail rivals in the crucial holiday period, signed up a wave of new customers to its Prime service and far exceeded sales and profit estimates. The company weathered rising shipping costs with profit stability in cloud-computing and advertising businesses.

Investors embraced the news as a sign of continued market dominance, adding about $70 billion to Amazon's market value. The company reported an annual profit of $11.59 billion, up 15% from 2018. In comparison, the nearly 26-year-old company had recorded earnings above $1 billion just once before 2016.

Amazon is entering a new era of profitability and set to generate significant volumes of cash, according to R5 Capital. The company ended the fourth quarter with approximately $55 billion in cash and marketable securities.

Amazon blew "Wall Street's expectations out of the water," said Reid Greenberg, an analyst at consulting firm Kantar, who noted that the company's profits are growing rapidly in advertising, where it is capturing market share from Alphabet's Google and Facebook Inc.

Amazon shares closed higher Friday at $2,008.72. The company had opened the day trading at $2,051.47 but lost gains throughout the day. It needed to close at $2,008.80 to cross the $1 trillion threshold.

This marks the second time Amazon missed finishing out a trading session above that milestone after crossing it throughout the day. The company's value briefly reached $1 trillion in intraday trading in 2018 but never closed above that level.

Amazon's path to $1 trillion began more than two decades ago, when Chief Executive Jeff Bezos left his position at New York investment firm D.E. Shaw to begin selling books on the internet. In his initial shareholder letter in 1997, he set the stage for many years of losses when he declared the company's indifference to "short-term Wall Street reactions."

Lately, those reactions have moved sharply in Amazon's favor. Since trading below $40 in 2008, Amazon's stock has climbed steadily and accelerated in recent years, in part because cloud computing and advertising have become reliable profit generators even as the company continues to invest aggressively in e-commerce expansions.

The stock jump boosted Mr. Bezos' personal wealth by more than $10 billion, according to FactSet data. That nearly equals the combined market value of retailers including Macy's Inc., Kohl's Corp. and J.C. Penney Co., which reported worse-than-expected sales during the holiday period.

Amazon's sales from October to December expanded roughly 21% to a record-breaking $87.4 billion. "We saw essentially very strong holiday performance from the middle of November on," Amazon Chief Financial Officer Brian T. Olsavsky said in a call Thursday.

Amazon's gains have continued even as other retailers with a larger bricks-and-mortar presence struggle. Target Corp. fell short of its own expectations in the holiday period, citing weak sales in toys and electronics. The company warned this month that growth for its full fiscal fourth quarter, which includes January, would likely fall short of its previously predicted 3% to 4% growth.

Another tailwind was significant growth in Amazon's Prime membership program, which signed up more new customers in the final three months of the year than in any other three-month period. There are now 150 million Prime members world-wide, up from 100 million in 2018.

The company continues to expand Prime through faster shipping and other benefits. Members pay $119 a year to access free and fast shipping options, Amazon's streaming service, discounts at Whole Foods Market and other benefits.

Amazon's 150 million Prime subscribers exceeded by about 15 million the total that James Cordwell, an analyst at Atlantic Equities, had estimated. "I think that it speaks to some of the benefits you see as you reaccelerate the business," he said.

Mr. Cordwell says Amazon shares could reach $2,500 over the next 12 months, suggesting a more than 23% rise from current trading levels.

Bowdeya Tweh contributed to this article.

Write to Sebastian Herrera at Sebastian.Herrera@wsj.com

 

(END) Dow Jones Newswires

January 31, 2020 17:41 ET (22:41 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Amazon.com Charts.
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Amazon.com Charts.