Avoid Amazon as Government Regulators Zero In

  • Amazon (AMZN) stock’s astounding multi-year bull run could come to an end.
  • Sure, Amazon demolishes retail businesses, but it might not be able to shake off government probes.
  • Investors should refrain from adding to their AMZN stock positions now.
Amazon (amzn) LOGO ON THE SIDE OF A BUILDING.

Source: Sundry Photography / Shutterstock.com

Everybody and their uncle knows Amazon (NASDAQ:AMZN) is the unstoppable 800-pound gorilla among e-commerce businesses. Yet, AMZN stock’s seemingly never-ending path to $4,000 might encounter some huge roadblocks in 2022.

If you’re going to hold onto a $3,000 stock with a price-to-earnings ratio around 49x, you’d better have an airtight bullish thesis. Any major problems could cause the share price to come tumbling down.

And if any problems could be described as “major,” it would be problems with the government. As we’ll see, regulators — and even the commander-in-chief — have their sights set on Amazon, and not in a good way for the company.

AMZN Amazon $3,019.11

What’s Happening with AMZN Stock?

Here’s the weird thing about AMZN stock. It’s on a steep uptrend over the past decade, but it’s been stuck in neutral since the summer of 2020.

That’s right: if you had bought Amazon shares in June 2020, you wouldn’t have lost money, but you wouldn’t have made money either. This is undoubtedly frustrating for Amazon’s investors — and it’s what technical traders might call “exhaustion” among the buyers.

Don’t get the wrong idea here. Amazon is still on the path to world domination, ready to destroy both e-commerce and brick-and-mortar businesses on multiple continents. For instance, the company is opening a massive 15,600-square-foot sort center in Australia.

Of course, the high U.S. dollar inflation rate might deter some folks from shopping, and this could prove to be a headwind for Amazon. Yet, inflation might end up being the least of Amazon’s near-term problems.

As it turns out, some U.S. regulators are evidently waging battle against the e-commerce giant. For example, the Securities and Exchange Commission (SEC) just ruled against Amazon in a fight with investors over its tax disclosure.

Tax transparency reform is a rather arcane issue, but suffice it to say that some of Amazon’s investors were displeased with the way the company disclosed (or failed to disclose, as the case may be) its income tax contributions.

Amazon, Here We Come

The point here is that Amazon isn’t immune to government scrutiny. In another example of this, the SEC is reportedly probing Amazon’s handling of its employees’ use of sellers’ data for private labels.

Again, we’re dealing with a rather arcane issue. Only time will tell whether Amazon’s employees did, in fact, use sellers’ data to promote Amazon’s private-label business.

But again, the point is the company is on the government’s radar. Are you really prepared to invest in a business that has federal regulators on its back? And when I say “government,” I’m not only referring to the SEC. Indeed, the commander-in-chief himself has his eye on Amazon.

The message was a clear as day. “And by the way, by the way, Amazon here we come. Watch. Watch,” President Joe Biden recently declared in a speech at the North America’s Building Trades Unions (NABTU) Legislative Conference.

There’s no denying it: Biden is pro-union, and he’s taking Amazon to task. White House press secretary Jen Psaki clarified Biden’s stance, stating, “What he was conveying is his long-time support for collective bargaining, for the rights of workers to organize, and their decision to do exactly that in this case.”

This isn’t the place to debate whether Biden should or shouldn’t take aim at Amazon. Rather, the point is that the president could push for initiatives that cause major problems for Amazon and its stakeholders.

What You Can Do Now With AMZN Stock

“Never try to do battle with the government” can be a sound and sensible strategy, especially when it comes to investing. You’re certainly welcome to have any political beliefs. Keeping them out of your investment strategy might be a good idea, though.

In the case of Amazon, it looks like some federal officials are prepared to put pressure on the company. This could have a negative impact on AMZN stock, so it’s probably wise to refrain from adding to one’s position for the time being.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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