Amazon.com Inc. (AMZN), which briefly became the second U.S. corporate to exceed $1 trillion in market capitalization after Apple Inc. (AAPL) earlier this year, should break up into two separate entities to avoid antitrust investigations and optimize shareholder value, according to one team of bulls on the Street. 

Smaller Market Value to Bring Slightly Less Attention to Amazon's Size and Dominance

In a note on Monday, Citi Research analyst Mark May, who rates shares of the e-commerce and cloud computing giant at buy, called the tech giant a "top pick" in the internet industry. Yet as the White House becomes increasingly "obsessed" with the Seattle-based retailer and its Chief Executive Officer (CEO) and founder Jeff Bezos, who also owns The Washington Post, May suggested that the firm could take a bold step in reducing regulatory risk by splitting its retail and cloud computing businesses. 

On top of the growing tension between President Donald Trump and Bezos, more eyes have been placed on Amazon thanks to its burgeoning market valuation and its CEO's status as the richest person in the world, swiftly surpassing Microsoft Corp.'s (MSFT) Bill Gates and Berkshire Hathaway Inc.'s (BRK.A) Warren Buffett. 

"By separating the retail and AWS businesses, Amazon could minimize or avoid the risk of increased regulatory pressure," wrote May. He expects a smaller market capitalization of roughly $400 billion for the FAANG company's retail arm and a $600 billion valuation for its public cloud computing behemoth Amazon Web Service (AWS) to bring "slightly less attention to its market size and dominance." 

The analyst listed several other benefits of a breakup, including the creation of a more attractive M&A currency for potential acquisitions, better alignment of stock-based compensation/incentives, a minimization of conflicts of interests and improved shareholder selection. May added that a break up would help "to achieve a better valuation as a pure play," as well as to take advantage of the planning of Amazon's second headquarters, to plan for Bezos' succession and to "promote and retain key executives."

May reiterated a 12-month price target of $2,250 for Amazon stock, implying a near 17% upside from Monday afternoon. Trading down 2.2% at $1,927.50, Amazon shares reflect a 64.8% gain year-to-date (YTD), sharply outperforming the S&P 500's 8.4% return over the same period.