Amazon: Possibility Of A Slowdown In Growth

The online retail industry has been going through a major change in the recent times. According to reports, the online retailers have been asked to start paying sales tax in at least 12 states across the US and the number looks likely to see an increase.  This move will impact the overall online retail industry but will have a huge negative impact on Amazon (NASDAQ:AMZN).  The change in policy will increase the cost of purchases for the end customers making it less desirable for them to make the purchases online vis-à-vis the physical retailers. This will negatively impact the revenue growth of all big online retailers and we know how much Amazon values this metric. The fact that Amazon has been sacrificing profits to generate higher growth speaks volumes about the importance Jeff Bezos and company pay to revenue growth.  On a comparative basis Amazon retail revenues accounted for over 80% of their Q2 2013 total revenues whereas during the same period eBay generated just above 50% of its revenues from retail and the rest from PayPal and its other services. The domestic growth at Amazon came in at 13% Y/Y whereas the global growth rate was close to 30% in Q2 2013. The spread of the new rule will only further slow the domestic growth rate putting an increased pressure on the company to generate growth, the foundation of the story Bezos tells to his investors. eBay, as we had covered in our newsletter a couple of days ago, has a more profitable business model and does not solely value the growth metric the way Amazon does. Amazon will need to change its business model to continue its growth, or they need to change their strategy and start looking at a metric they have ignored for long. Yes I mean earnings per share, which Amazon has shown no regard for in the last several years. The AMZN stock was up close to 5% in yesterday’s trading, closing the day at a share price of $293.64.

To see Amazon’s latest stock price movement, click here (NASDAQ:AMZN)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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