24/7 Wall St.

The market has held a number of things against Amazon.com Inc. (NASDAQ: AMZN) management. Among them are the e-commerce company’s penchant for offering free shipping that damages margins. Another is that the company has entered too many businesses, including video on demand. Yet another concern is that Amazon may sell some of its Kindle products at a loss in the hope of selling books or software for the device later to make up for the negative margins. However, none of these has dented Amazon’s base of enthusiastic stockholders and the investors who join their legions almost daily.

Amazon’s share price has risen from just above $220 before Thanksgiving to $254. That has thrashed the improvement in the Nasdaq over the same period, and well outperformed shares of the two companies that by almost all measures have the largest online visitor bases after Amazon’s total — Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT). Amazon’s growth for the current quarter will have to be spectacular to justify the run-up.

Analysts expect Amazon’s revenue in the current quarter to reach $22.5 billion, up from $17.4 billion in the same period a year ago. The e-commerce company’s sales improvement record would justify the estimates, but forecasts for net income are another matter. Many analysts expect per-share earnings to be flat at around $0.38. It would seem that level would be a disappointment, but Amazon’s share price says otherwise.

Investors seem content for now that widely regarded founder and CEO Jeff Bezos has made a reasonable trade-off between top line growth and a sacrifice of earnings to keep a torrid pace of revenue improvement. There will be a tipping point among Wall St. investors, though, when they believe that the earnings sacrifice is too great.

That tipping point has not come yet. But if per-share earnings show a sharp drop in the current quarter because of Bezos’s strategic plan to gain market share, the share price improvement will end.

Douglas A. McIntyre