Amazon (AMZN) rose 4.6% yesterday, hitting a seven-year high of $73.65.  The reason for the surge - Jeff Bezos announced that the company plans to increase its investment in China, where its Joyo.com unit is Amazon’s fastest growing business. After a quick look at the most basic facts, you’ll see why this is completely insane:

The Wall Street Journal reported that according to Analysys International, a Beijing tech consulting firm, the entire Chinese online-retail market accounted for $133 million during 1Q2007.  Amazon’s Joyo.com unit is the #2 player in the market with a 12% share (behind #1 player Dangdong.com which has an 18% share).  So, Joyo.com generated roughly $16 million during 1Q07, which representes a whopping 0.53% of the $3.02 billion that Amazon generated overall.

So let me get this straight, Bezos created $1.3 billion in market value for Amazon by announcing that the company would be investing more in China where its relatively insignificant Joyo unit lags behind its chief local rival.  Sure, Joyo could one day become a major contributor to Amazon’s revenue (and profits), but it will take major investment to get there and one of the main reasons AMZN has had such an incredible run lately is because Bezos said the company would be cutting back on its investments to boost profit.

Not surprisingly, no Wall Street analysts have raised the above issue.  As AMZN approaches trading at 75x 2007 estimates (and 50x even the highest 2008 estimates), they just keep raising their price targets and providing shoddy rationale for doing so.

Where’s Henry Blodget when you need him?