On Monday I asked, "Is Amazon.com (Nasdaq: AMZN) overvalued?"

Given the bullish reaction to last night's third-quarter report, I guess Mr. Market's saying "no."

Amazon headed toward the checkout line with another monster quarter in its cart. Net sales soared 28% to $5.45 billion, well ahead of analyst expectations of an 18% top-line jump. At the other end of the income statement, the pros expected earnings to climb merely 22% to $0.33 a share; instead, Amazon's profit soared 68%, to $0.45 a share.

Want even better news? Just follow the money. Amazon's free cash flow over the past year has nearly doubled, to $1.92 billion. With 451 million shares outstanding, we're talking about $4.26 a share in free cash flowalone. Just keep that in mind the next time a bear tries to justify a short position by relying on the company's significantly smaller reported profit number.

Yes, but what will you do for me tomorrow?
However, all these glad tidings don't make this an ideal time to dive in to the stock. When David Gardner recommended Amazon.com to Motley Fool Stock Advisor subscribers seven years ago, the company traded at $15.31. Depending on where the stock is trading by the time you read this, it may have gained that entire amount -- if not more -- in a single trading day. We call that a daybagger -- or a spiffy-pop-- around here.  

In retrospect, we'd all be gazillionaires. If someone told you in the summer of 2002 that you could buy Amazon for less than four times 2009's free cash flow, even patient bears would be buyers. So for today's envious, uncertain potential investors, it's only fair to ask the obvious question: Where will Amazon be seven years from now? 

Obstacles come in threes
To assess Amazon's opportunities, we must first take stock of its challenges. Katrina Chan broke out the primary threatsto Amazon's model earlier this week:

I'm not worried about the copycats. Every couple of years, there seems to be a new, hungry upstart nipping at Amazon's heels. Buy.com, Overstock.com (Nasdaq: OSTK), and even Wal-Mart 's (NYSE: WMT) walmart.com have all risen to the challenge, but Amazon's ultimately left all of them eating its dust. The power of Amazon's purchase-promoting Prime membership planonly gets stronger with every passing year. Even category specialists who step briefly into the market's spotlight -- Blue Nile (Nasdaq: NILE) with jewelry, or Drugstore.com (Nasdaq: DSCM) with pharmacy-store sundries -- ultimately can't match Amazon's sustained growth pace.

The Kindle clones, I do take seriously. Barnes & Noble 's (NYSE: BKS) Nook raises the stakes on what e-book fans will expect from of a $259 reader. Apple (Nasdaq: AAPL) is one iTablet announcement away from changing the way we consume digital books, magazines, and newspapers. The Kindle may be hot now, but there will probably never be one single e-book device standard -- the iPod, if you will -- to rule the land. Continued...