Amazon.com, Inc. (NASDAQ:AMZN) has announced plans to take on 70,000 seasonal workers for the coming holidays, and the market seems optimistic about the move. Shares rose by more than 2.5 percent on yesterday’s market after the company announced the plan.
Amazon’s valuation is still far above what would be deemed reasonable, and its stock chart this year is beginning to resemble its chart in the heat of the dot com bubble. Does a 40 percent rise in seasonal hiring at Amazon.com, Inc. (NASDAQ:AMZN) really justify increased optimism about the company given the huge expectations already built in?
Analyst attitude on Amazon
The attitude that lead to the increase in Amazon.com, Inc. (NASDAQ:AMZN) yesterday is based on trust in the company’s decision making and forward projection. That trust is not necessarily misplaced at Amazon.com, Inc. (NASDAQ:AMZN), but the company is not necessarily one to equate investment with earnings.
Amazon.com, Inc. (NASDAQ:AMZN) received a number of positive reports from analysts after yesterday’s announcement, but the company did not receiving an earnings upgrade in most. Mark May of Citi wrote that the hiring was a “meaningful acceleration of last year’s hiring growth” but didn’t mention the direct effect on actual sales.
Amazon.com, Inc. (NASDAQ:AMZN) has been known to make investments that do not pay off in the short-term. The hiring of more seasonal workers could represent one of a number of different investments. One of the likely examples is the improvement of infrastructure and delivery time rather than outsized sales. Amazon.com, Inc. (NASDAQ:AMZN) is bound to grow by a huge margin this Christmas, but it won’t match the 40 percent increase in staff.
Valuing Amazon
Amazon.com, Inc. (NASDAQ:AMZN) is a difficult company to value. Most of the difficulty comes from the almost unbearable value that the market already puts on the company. Investors are expecting Amazon.com, Inc. (NASDAQ:AMZN) to grow by a huge amount in the coming years. It is not expected to grow earnings by all that much in 2013, and a marginal improvement should not lead to a noticeable increase in share price.
The market is event and news driven, however. Positive news about Amazon.com, Inc. (NASDAQ:AMZN) brings with it an increase in the value of the company even if it is close to meaningless. The 70,000 hires were about as close to a puf piece on Amazon.com, Inc. (NASDAQ:AMZN) as could be conceived.
