Amazon's Sales Tax Strategy - Research Report on Amazon.com, Inc.
With new states now charging sales tax for Amazon purchases, sales start to decline while doors are quietly opening up for competition. However, market share gains can sustain growth, analysts say.
NEW YORK, January 24, 2013 /PRNewswire/ --
After the states of California, Texas, and Pennsylvania started to implement a sales tax on purchases from online retail giant Amazon.com, Inc. (NASDAQ: AMZN) [Full Research Report](1), data from ChannelAdvisors suggested that sales in the three states took a dip after the price hike. However, sales spiked as high as 70 percent greater than other states one week earlier, with another spike during the holiday season.
In addition, a report from Market Daily News suggests that Amazon could see a downward adjustment by as much as 15 percent after the recent surges. The report continued to highlight the similarities in price action to the company's history in October 2011, just before the price adjusted 15 percent downward due to poor earnings. Amazon's earnings announcement is scheduled on January 29.
Another setback due to the recent changes, the IRS is requesting that Amazon pay up to $234 million in allegedly unpaid tax bills due to the company's "transfer pricing" policy - the value placed on goods and services that are exchanged by corporates across borders. The company insists the agency overestimated the value of its intangible property such as software and trademarks.
Nevertheless, Motley Fool says the e-tailer is still expected to rake in $22 billion in revenues for the December quarter after booking $14 billion in the previous quarter. Losing that previous price advantage with the tax also wouldn't have much of an impact on overall earnings or revenue.
In fact, Pacific Crest had upgraded the retailer's rating to "Outperform" from "Sector Perform" and set a price target of $346 because the company's lead is growing in its sector, and recent gains in market share should sustain growth.
Goldman Sachs also set a "buy" rating at a more conservative $315 price target, saying the growth of e-commerce is driven by shrinking traditional retail footprints and favorable consumer demographics, while indicating that Amazon's shares should continue to exceed expectations.
Benchmark Co. analyst Daniel Kurnos says the company's Kindle tablet "may help boost fiscal Q3 and 2013 sales" as it has leveraged the development of the international mobile app portal. The ebook rental service and the previously announced Amazon AutoRip - which gives customers free digital versions of music CDs they purchased from the company since 1998 - is also expected to boost revenue.
(1) The Full Research Report on Amazon.com, Inc. - including full detailed breakdown, analyst ratings and price targets - is available to download free of charge at: [http://www.nationaltradersassociation.org/r/entire_report/6d6b_AMZN]
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Contact: Demi Lapierre
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