Amazon stock hears the music
The bookseller's foray into the music business is fraught with risks, but its stock jumps anyway.
The company's stock climbed to a new 52-week high today, closing at 62.5 just hours after the online bookseller expanded its business to include online music sales. It plans to offer more than 100,000 CDs, becoming the latest player to enter a hotly competitive but largely money-losing business.
The more than 15 percent increase in Amazon's stock came despite a 1.33 percent slump in the tech-heavy Nasdaq and a 1.78 percent drop in the Dow.
Despite Wall Street's optimism, Amazon faces myriad risks in the online music business. In a recent Securities and Exchange Commission filing, the company warned that CD sales could dampen results from the rest of its business.
The Net store also faces stiff competition from other online music sellers such as CDnow and N2K's Music Boulevard, both of which boast upward of 200,000 titles.
Analysts remain mixed on whether Amazon's expansion into music sales will be successful.
Jupiter Communications senior analyst Regina Joseph was more skeptical of Amazon's chances for success in the online music space.
Other analysts chalked Amazon's run-up to a "short squeeze."