Amazon.com, Inc. (AMZN): Change In Tactics

Foolish bottom line

Personally, I’m skeptical of the argument that charging sales tax will have no impact on Amazon. Obviously, sales-tax avoidance is not the only reason people buy from Amazon: Amazon often has the lowest price for an item, and many consumers find it very convenient.

That said, to argue that a 5% to 10% difference in price has no impact on consumer behavior would imply that most people don’t care very much about price. That does not seem very plausible; after all, one of the major reasons people shop Amazon is to get a lower price.

As Amazon continues to roll out sales tax to more states, its sales growth trajectory may continue to flatten out. Yet Amazon investors are clearly betting on a long period of growth; the stock trades for 100 times forward earnings. If sales tax drags down the growth rate by just a few percentage points, it could trigger a significant correction in Amazon stock.

The article Amazon Continues to Roll Out Sales Tax in the U.S. originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. 

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