President Donald Trump’s attacks on Amazon.com Inc. (AMZN), which have been intensifying in recent days, may be tanking the stock, but Wall Street analysts aren’t so concerned, telling investors any weakness presents a buying opportunity.
Since last week, shares of the country’s largest online retailer have been plummeting, erasing billions in market value, after President Trump ratcheted up his criticism of the company, wondering if the government can go after it on antitrust or anti-competitive grounds. Since Axios, citing five sources, broke the news about Trump’s hatred of Amazon, the president has taken to Twitter, railing against Amazon’s business model, the perceived impact on the U.S. Postal Service and The Washington Post, which is owned by Amazon Chief Executive Jeff Bezos. (See also: Trump Campaign Spent $150K+ on Amazon: CBS.)
With worries spreading that the Trump administration could go after Amazon, shares have been plummeting, taking the rest of the tech sector down with. Trump's attacks on Amazon has even emboldened critics of the online retailer, with the former Walmart Inc. (WMT) CEO Bill Simon calling on Congress to look at breaking up the online behemoth.
'Small Risk' of New Regulation
Despite the increasing attacks, Wall Street bulls aren’t deterred. They have come out in defense of the company that is in the process of choosing the location for its second headquarters in the U.S. that will create thousands of new jobs. Take Deutsche Bank: According to Investing.com, the Wall Street firm said that while there is a “small risk” that the White House could introduce new regulation, it wasn’t a sure bet. After all, if it was, the president would have already tweeted about it, Deutsche Bank said. Meanwhile, Investing.com cited GBH Insights as saying the odds of regulation changing Amazon’s business model or tax structure are minimal.
Echoing that assumption, Piper Jaffray analyst Michael Olson told clients in a research report covered by CNBC that even if Trump was able to change Amazon’s tax policy, which is unlikely, it wouldn’t change the fact that consumers are using Amazon in droves. "Nothing can be certain, except death and taxes … and more Trump tweets on Amazon," Olson wrote in a note. "We believe sales tax collection changes would have limited impact on consumer use of Amazon and could actually help Amazon's relative competitive positioning in domestic e-commerce." He pointed to a Piper survey of 2,000 U.S. consumers that found 5% count sales tax as a major reason they shop with a particular retailer with most shoppers focused on fast and free shipping, Website security and product offerings. As a result, Olson said a change to the tax code would have little impact on sales on Amazon’s platform.
As for Trump’s other argument that Amazon is hurting the U.S. Postal Service, Olson said that it’s not likely to result in higher rates but if it does the company will just shift its business elsewhere. "We find it unlikely that the Post Office will materially raise rates for Amazon deliveries," Olson wrote, according to CNBC. "Amazon would likely shift to alternative shipping options (perhaps both internal and external)." Olson has a $1,650 price target on Amazon and advised investors to add to their positions on the weakness. Recently the e-commerce giant was trading up $22.97 or 1.67% to $1,394.96. Piper Jaffray’s price target implies the stock could gain an additional 18%.