Amazon, despite being a household name, and being the 8th most visited site on the internet, is doing poorly. Despite maintaining a near-record high stock price, Amazon’s profits are non-existent (US$ −39 million (2012)). It is clear that Amazon is experiencing “irrational exuberance” a term coined by former Fed chief Alan Greenspan to describe roaring stock prices that do not reflect the health of a company.
Some disagree; according to William H. Janeway, an economist and venture capitalist, “The market is effectively limitless: all of global consumer commerce and maybe business-to-business commerce as well.” Janeway goes on to contradict himself when he says that “[Amazon’s price to earnings ratio] violates mainstream finance theory. Very few companies have been valued this way outside a systemic bubble.”
Other experts agree that Amazon’s lack of profitability is unsustainable. “At some point, the piper must be paid,” said George Colony, the chief executive of Forrester Research. How? “By raising prices. I don’t see any other way.”
Cash strapped cities and states may soon turn to tax online retailers to fill empty coffers and pay debts accrued from reckless spending and graft over decades. Although Amazon won a temporary reprieve from the states’, as the Illinois high court rejected the Amazon sales tax, which was active in eighteen states, because the tax violated federal rules against “discriminatory taxes” on digital transactions, we are reminded of Benjamin Franklin’s aphorism of death and taxes. This, coupled with the unsustainable Fed-fueled stock-market bubble, makes Amazon’s future bleak.
