eBay’s smaller sellers will still be able to avoid collecting sales tax, and for bargain hunters, this would make the site their first shopping destination. Amazon.com, Inc. (NASDAQ:AMZN) will have to compete primarily on price and convenience. The big three box stores, Best Buy, Target Corporation (NYSE:TGT), and Wal-Mart Stores, Inc. (NYSE:WMT), should benefit directly from this even playing field. The fact is, customers can already buy online and have the items shipped to any of these stores. In addition, all three companies have been aggressive about matching prices.
With analysts calling for negative growth at Best Buy in the next few years, this sales tax issue could help reverse that trend. The stock pays the highest yield at 2.6%, and sells for the cheapest P/E ratio (11.7) of the bunch. Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) will almost certainly gain some sales momentum from this change. With over 4,000 domestic Wal-Mart Stores, Inc. (NYSE:WMT) stores, and about 1,700 Target Corporation (NYSE:TGT) stores, it’s not hard to imagine customers choosing immediate satisfaction over saving a dollar or two. With 9.4% and 12% growth expected from Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) respectively, investors might want to consider what would happen if both companies growth rates increased.
Though eBay wants the bill to change, eBay seems better positioned than Amazon. eBay’s business is only 60% driven by their Marketplace business as it is. With smaller sellers still able to avoid sales tax collection, more online shoppers might check eBay first.
Amazon seems to be the clear loser. The company is almost certain to lose sales to their existing competition. Amazon’s pricing isn’t as cut-throat as it used to be, as evidenced by their over 26% gross margin last quarter. Assuming this bill passes, Amazon’s competition is likely to make sure that every customer knows that the playing field has been leveled. Considering that Amazon’s stock sells for nearly 200 times projected earnings, any slowdown in growth could level the stock price as well.
The article Who Wins And Who Loses When This Battle Is Done? originally appeared on Fool.com and is written by Chad Henage.
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