By Shares of Amazon.com Inc. took a hit on Tuesday following the Federal Trade Commission’s (FTC) antitrust suit against the online retail giant. However, one analyst downplayed the potential risk, even speculating on the possibility of the company getting broken up.
D.A. Davidson analyst Tom Forte noted in a Tuesday note that the lawsuit, which accused Amazon of illegally maintaining monopoly power, wasn’t surprising given the ongoing efforts of regulators worldwide to untangle Big Tech from users’ lives. Joined by seventeen state attorneys general, the FTC brought forward the case.
Forte also highlighted the fact that regulatory scrutiny hasn’t affected the share prices or quarterly results of other tech giants like Apple Inc., Alphabet Inc., and Amazon itself.
“We still feel that way, after this news,” Forte assured.
In an interesting scenario where the government breaks Amazon into three parts—first-party retail, third-party retail, and cloud computing—Forte suggested that the stock would still likely be worth more on a sum-of-the-parts basis if the lawsuit ends in the company’s division.
“Based on our sum-of-the-parts analysis, we believe shares could be worth as much as $193 (compared to its recent close of $131) and as little as $148,” he concluded.
Amazon Shares Decline Following FTC Lawsuit
Shares of Amazon experienced a 4% drop during regular trading hours on Tuesday, closing at $125.98. The stock remained relatively stable in after-hours trade.
Amazon strongly refuted the lawsuit filed by the Federal Trade Commission (FTC) and described it as baseless both in terms of factual evidence and legal grounds. Industry experts believe that the FTC’s case will face significant challenges in the legal battle.
In a recent note, Wedbush analysts outlined that the FTC’s lawsuit primarily concentrates on Amazon’s business practices, which allegedly prevent merchants from lowering prices on other platforms. Additionally, the agency has raised concerns about Amazon’s attempts to further advance fulfillment and advertising services. The analysts predict that if the FTC manages to secure a victory, it would likely be on a smaller scale.
“While the FTC may achieve some level of success through this legal dispute, such as imposing monetary penalties or restricting certain business practices, we maintain our belief that any substantial changes to Amazon’s structure are improbable,” stated Wedbush analysts.
Considering the current circumstances, they suggest that investors should view the decline in Amazon shares as an opportunity to buy.
Conclusion
Despite the negative impact of the FTC lawsuit, Amazon remains confident in its position. Analysts believe that any potential changes resulting from the litigation would be limited in scope.
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