AMZN Stock Crash: Is It Overrated or Underrated?

April 16th, 20182:55 am @

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 amazon stock crash
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Trump’s War on Jeff Bezos

Although shares of Amazon.com, Inc. (NASDAQ:AMZN) broke records in 2017, this year’s growth has been stunted by an ongoing feud with, you guessed it, President Donald Trump. The president’s tweets regularly cause a minor AMZN stock crash.

For instance, on March 29, 2018, he tweeted:

The result was a four-percent drop in the Amazon stock price. Given that AMZN is a highly traded equity with less than 0.5% volatility on average, it’s clear that Trump was behind the drop.

The good news is that Amazon stock recovers quickly. Within the same trading session, AMZN bounced back to above one percent. The bad news, however, is that Trump seems intent on extracting a pint of blood from Amazon.

“He’s obsessed with Amazon,” a source told Axios. “Obsessed.” (Source: “Trump hates Amazon, not Facebook,” Axios, March 28, 2018.)

Trump believes that Amazon is a leech on society. He argues (incorrectly) that Amazon gets a free ride on the U.S. Postal Service, and (correctly) that its low tax rate helps it undercut mom-and-pop retailers on price.

According to Axios, he also brings up the company in any conversation about antitrust or tax policy, hoping that someone will give him an idea how to regulate it.

Trump’s strong dislike of Amazon might also have something to do with his personal anger toward CEO Jeff Bezos, who happens to owns The Washington Post as well.

The Washington Post—which is frequently among the president’s sharpest critics—was sold to Bezos in 2013, ending 80 years of ownership by the Graham family. Trump argues that the newspaper has become a mouthpiece for Bezos, who is unafraid to use it as a cudgel against his enemies.

Whatever the reason, President Trump wants his pound of flesh from Amazon. Will he get it?

What Can Trump Really Do?

So far, Trump has only shot words at Amazon. He could, in theory, ask the Justice Department to investigate Amazon for antitrust, but it’s unlikely that an investigation would get very far.

Chart courtesy of StockCharts.com

You see, U.S. antitrust is based on consumers. If someone has the market power to single-handedly raise prices, thereby hurting consumers for no good reason, regulators will rugby-tackle them to the ground.

But Amazon doesn’t raise prices—it cuts them. Its guiding principle is to make customers happy, meaning you’d have a tough time arguing that customers are worse off in an Amazon-dominated world.

On the other hand, Trump could go after Amazon’s treatment of workers. There was a huge outcry about those issues last year when, after reports surfaced detailing grueling hours and back-breaking labor, the company did nothing to change conditions at its distribution centers.

Trump could theoretically muster enough bipartisan support to improve conditions at those warehouses, thereby taking a slice out of Amazon’s profits and, in turn, its share price. But that’s a lot of “ifs.”

On the whole, it seems like President Trump is just venting his frustrations. Reports from inside the White House say he doesn’t have a formal plan or anything like it, giving AMZN stockholders a good reason to be optimistic.

What About Congress?

Just as an aside, investors should probably keep an eye on the Facebook–Cambridge Analytica scandal. The fallout from that report took a bite out of Facebook stock.

In the immediate aftermath, Facebook, Inc. (NASDAQ:FB) lost nearly $50.0 billion in market cap. Facebook tried to clean up the damage with an apology and promises to do better, but Congress went as far as summoning CEO Mark Zuckerberg to Capitol Hill to get answers.

They questioned him about what happened, why it happened, and how to make sure it never happens again. But more than anything, they tried to embarrass Facebook on national television. Too bad it didn’t work.

Zuckerberg was able to deflect most of the anger targeted at Facebook by staying calm and apologetic. You can read our analysis of his Senate hearings here.

Nonetheless, there’s been a definite shift in how Silicon Valley is perceived by the rest of the country.

How else can you explain that Facebook was appearing before Congress at the same time President Trump was railing against Amazon? It’s not a coincidence. The sad truth is that America is turning on the technology companies that form its economic engine.

Analyst Take

While I wouldn’t worry about a Trump-induced AMZN stock crash, I am concerned about the anti-tech attitude creeping into Washington.

Regulators need to remember that most of America’s gross domestic product (GDP) growth is coming out of Silicon Valley, not the District of Columbia. If they don’t, both investors and the country at large could be in serious trouble.

Article source: https://www.profitconfidential.com/stock/amazon-stock/amzn-stock-crash-is-it-overrated-or-underrated/