The Donald Trump administration is clearly trying to hurt Amazon.com, Inc. (NASDAQ:AMZN). Since the administration has sufficient tools to accomplish this goal, investors should sell AMZN stock.
President Trump’s anger at Amazon stems from the many negative articles about Trump, his campaign and his administration that have been published by The Washington Post, which is owned by Amazon CEO Jeff Bezos.
Upset with a number of the newspaper’s articles during the campaign, Trump called its coverage “inaccurate” and banned it from covering campaign events and personally attacking one of its reporters. He also accused the company of not paying “internet taxes.”
Trump also lashed out at Bezos and Amazon during the campaign, saying that the CEO “bought The Washington Post to have political influence” and ominously warning that “if I become president, oh do they (i.e. Amazon) have problems. They’re going to have such problems.” In the course of the campaign, Trump also warned that Amazon has a “huge antitrust problem.”
In May 2017, Drudge Report founder and editor Matt Drudge suggested that Bezos has been “motivated in bloodsport after Trump threat of Amazon monopoly breakup,” Drudge wrote, according to The Washington Examiner.
Indeed, The Post has published several damaging stories about Trump and his administration, including the revelation about the president sharing intelligence with Russian officials, the news that Trump displayed a fake cover of Time Magazine featuring his likeness at a number of his establishments, a report that Trump’s attorney general, Jeff Sessions, talked about the presidential campaign with the Russian ambassador, and most recently, transcripts of the president’s conversations with two foreign leaders.
And in recent weeks the Trump administration has begun to fight back. Specifically, the Federal Trade Commission (FTC) is investigating whether Amazon misleads users about its discounts, and the government is probing the e-commerce giant for possibly violating the sanctions that Washington has leveled against Iran.
In light of the ongoing feud involving Bezos, Trump and The Washington Post, the government could easily turn up the heat much further on the e-commerce giant.
For example, the probe into the company’s discounts could easily turn into a full-blown antitrust investigation. The chances of such a development are especially high since Trump believes that the company has “a huge antitrust problem.” And given the president’s accusation about the company failing to pay “internet taxes,” there is a good chance that the federal government could look into whether it is paying its fair share of sales taxes, corporate taxes or both.
An antitrust probe would be especially ruinous for AMZN stock. With its very high valuation, AMZN likely reflects continued market share gains by the company in its core e-commerce businesses, as well as large advances by the company in sectors where it is not yet dominant, such as furniture, business-to-business e-commerce and food delivery.
Bottom Line on AMZN Stock
Any antitrust investigation would likely be seen by investors as potentially resulting in limits in Amazon’s ability to enter new sectors and grow in the sectors where it currently has a foothold. The market could also worry that the government may prevent the company from continuing its current strategy of wiping out much of the competition with low prices.
Moreover, investors could conceivably be concerned about the government imposing other penalties, such as regulating how Amazon deals with its vendors or even splitting the company into two parts, i.e. separating the cloud business from the e-commerce business.
For these reasons, if a full-blown antitrust probe is lunched, the multiple of AMZN stock will almost certainly drop significantly from current levels.
I recently sold shares of Amazon stock. For the reasons I outlined above. Other investors should follow suit.
As of this writing, Larry Ramer does not currently own any shares of any of the companies mentioned in the article.