President Donald Trump is continuing his assault on Amazon.com, Inc. (Nasdaq: AMZN), sending the stock down another 5.2 percent Monday. While some Wall Street analysts say Amazon is mostly shielded from a potential regulatory crackdown in Washington, others are concerned Trump’s words may be doing more damage than investors realize.
Last week, Axios reported that Trump is “obsessed” with Amazon and its CEO and world’s wealthiest person, Jeff Bezos. Trump is reportedly looking for ways to increase Amazon’s tax burden or potentially target the company via antitrust law.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
Trump, who has a history of publicly criticizing Amazon, Bezos and the Bezos-owned Washington Post, blasted Amazon on Twitter once again on Monday.
“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country…not a level playing field!” Trump tweeted.
Amazon doesn’t get a special rate from the U.S. Postal Service. But writing in the Wall Street Journal recently, money manager Josh Sandbulte explains that a formula set by Congress to keep the Postal Service from undercutting public shipping companies like United Parcel Service ( UPS) and FedEx Corp. ( FDX) hasn’t been adjusted since 2006. The law was written with the assumption that package delivery would be about 5.5 percent of Postal Service profits, but now parcels make up 25 percent of its revenue.
Last year, Citigroup estimated that if parcel service was accurately priced by the Postal Service, each package would be $1.46 more expensive to deliver. And since Amazon ships 40 percent of its packages through the Postal Service, it’s realizing a huge cost savings.
[See: 8 Stocks Primed for an Amazon.com Buyout.]
Bank of America analyst Justin Post says raising Amazon’s Postal Service shipping fees likely wouldn’t have much impact on the company in the long term.
“We assume higher fees would be offset by Amazon moving volumes to other shippers or just accelerating their own fulfillment build out,” Post says.
However, GBH Insights head of technology research Daniel Ives says Amazon’s current business may not be at risk, but it could become more difficult for the company to expand in the future. Regulatory concerns may also impact Amazon management’s long-term strategy.
“The lingering worry is that Trump and influencers within the beltway could present potential blockades around Amazon expanding further into health care/generic drugs and other consumer areas over the coming year on the broader anti-trust concerns thesis, which has been lingering in the background,” Ives says.
Despite the concerns, Post says Amazon is still a safe long-term bet for investors.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
“While regulatory risk can add volatility for the stock, and it’s hard to envision every potential outcome, we don’t see a scenario that materially reduces the long-term value of the company,” he says.
Bank of America has a “buy” rating and $1,650 price target for Amazon. GBH Insights has a “highly attractive” rating and $1,850 target for AMZN stock.
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This Is the Risk Amazon.com, Inc. (AMZN) Faces From Trump originally appeared on usnews.com
