Amazon (AMZN) is one of the biggest retailers in the country and Amazon.com receives 4,414,433 visits per day. Amazon was launched in 1994 and has since radically changed the game for many retailers. Retailers not only must battle other brick and mortar stores, but now they must also compete with Amazon’s online retail model. Despite the company’s past successes, the future doesn’t look that great for Amazon. New government regulations and a sky high valuation make other retail giants look much more attractive.

Many shoppers prefer to use online methods because they are tax free, but tax free online sales may soon be a thing of the past. Brick and mortar retailers argue that online sales should be taxed. Brick and mortar retailers argue that online sales should be taxed because normal retailers have to pay state and local taxes. There is growing bipartisan support in the U.S. Congress for a bill that would require online retailers to collect those taxes regardless of where you shop. California recently decided to end tax free shopping and other big states will likely follow suit. Laws that would end tax free online shopping poise a big problem for the online retail giant because an incentive to shop online would be gone.

The fundamentals and valuation are both poor. The stock is very overvalued and it has a P/E ratio of 3,000. In comparison, the online auction site eBay has a P/E ratio of just 18. The other metrics are also weak. The P/B ratio is 15.63 and the P/S ratio 2.02. Amazon also has razor thin profit margins of only 1-2%. Also, the company does not currently pay a dividend. Amazon was also held back in 2012 by it’s loss on LivingSocial.

I am bearish about the stock because of its sky high valuation and new online taxes. The stock enjoyed a great run in 2012 , but I don’t think that the run will continue in 2013. The stock does not appear to be undervalued in any way.