If you still look at Amazon Inc. (AMZN) as just an Internet retailing giant, you’re not just missing the point - you are also missing one of the really great long-term profit plays in the market today.

Amazon remains the proverbial 800-pound gorilla in the online retailing space. And business is both healthy and growing. But the company is counting on a whole new series of technology-based ventures that will provide the real fuel that will put this stock into orbit. Let’s take a closer look.

Just last Thursday, in yet another positive "surprise" that Wall Street missed predicting, Amazon annihilated analysts’ earnings estimates by announcing a big jump in fourth-quarter profits and told investors even better days are ahead.

Fourth-Quarter Fireworks

In a financial-crisis environment in which there is supposedly no financing available, in which massive job cuts and huge job worries are causing consumers to cut way back on their spending, in which all retailers - even vaunted discounter Wal-Mart Stores Inc. (NYSE: WMT) - face huge challenges, Amazon actually increased its sales and profits.

In fact, Amazon’s fourth-quarter net income rose a hefty 9%. And not only did its per-share earnings of 52 cents blast through the Wall Street consensus of 39 cents by a full 33%, the company actually boosted its first-quarter outlook, stating that it expected sales to be stronger than analysts were predicting.

For the fourth quarter, Amazon’s sales advanced 18%, beating analysts’ expectations by about 4%. Sales actually would have grown by 24%, were it not for the strengthening of the U.S. dollar.

International sales were even stronger, and now account for a full 45% of Amazon’s overall sales.  One notable category was electronics and general merchandize advanced 31%, and that category now accounts for 43% of worldwide sales. 

One particularly noteworthy achievement was in the area of gross margins, which suffered almost no damage - in spite of a U.S. recession that’s forcing most retailers to discount heavily. Amazon’s gross margins barely budged, dropping from a fairly remarkable 20.6% to a still-enviable 20.1%. 

Remember, this outlook and performance is taking place in a market environment where there’s very little "visibility" - meaning company executives have almost no ability to predict what the market will look like next month, let alone in the next quarter or for next year. That’s forced a lot of companies to discount heavily, and is a key reason that a large number of firms have stopped issuing "forward guidance."

But not Amazon: It continues to provide guidance - and then to exceed those expectations.

How is the company making this happen? These results point to strong market-share gains for Amazon and to new lines of business being introduced, which are powering the stock higher.  But, before we go deeper into Amazon, let’s consider the economic backdrop, in order to fully appreciate magnitude of Amazon’s accomplishments.

Anatomy of a Meltdown

In my 25-year investment career, I have seen countrywide market meltdowns like the one we’re struggling through perhaps every two or three years.  The hallmark of these crises has been an implosion of the banking system, which has then brought the entire economy down, as well.

In an effort to provide some context - and perhaps some reassurance to U.S. investors - let me say that I’ve seen much worse than what we are seeing in the United States right now. For instance, there are actually cases where all of a country’s banking deposits are either frozen (Argentina 2002) or lost outright (Russia 1998).

In each of those cases, there were two constants:

• From a business standpoint, the strong got stronger as their weaker rivals foundered and failed, allowing them to pick up market share and sometimes to even buy those smaller or weaker rivals.
• From a stock-market-valuation standpoint, however, the strong were initially equally punished in terms of their market valuations as the broader equity markets blew up, meaning their valuations didn’t reflect the much-brighter outlooks for them as stronger market leaders. However, when the market outlook brightened, those stronger firms saw their valuations surge with a vengeance and soar to new heights.

The lesson from each of those crises - from Brazil and Argentina, to more than 10 countries in Asia and in Russia - was that every single country made it back.
This was even true for those countries shackled with inferior policy mixes.  Some might say that Japan - with its "lost decade" - never came back.  This would be an imprecise statement, since Japan’s gross domestic product (GDP) growth was above 2.0% for the two years prior to the crisis and unemployment for the last five years has been between 3.45 % and 4.5%
But what is true is that while even countries with inferior policy mixes eventually made it back, it took a lot longer for that to happen. The speed of their comebacks can be traced to the degree in which the policies implemented made them:

• Open-market oriented, especially with regards to foreign capital.
• A lower-taxation environment.
• Strongly fiscally disciplined - for the long term - because the governing body addressed such serious structural economic problems as imbalances in both the social security and health-care systems.
• Less constricted by regulation.
• More transparent, in both the private and public sectors, especially in cases where the public sector overhauls led to a more democratic governing process.
• More-consensus oriented, particularly when that consensus included support for all the changes I’ve listed here.