Amazon.com Inc.’s longstanding antitrust issues could take center stage ahead of the presidential election, say Monness Crespi Hardt analysts.
Tech companies are increasingly the focus of Trump administration investigations, with the Justice Department and the Federal Trade Commission looking closely at antitrust issues.
Perhaps sensing a bigger fight brewing, Amazon AMZN, -1.79% , along with Facebook Inc. FB, -1.41% and Apple Inc. AAPL, -2.94% , ramped up their lobbying to record levels in 2019, with Amazon spending $16.1 million.
The issue has been a persistent one for Amazon, with GlobalData Retail saying that a 2018 revenue slowdown at the e-commerce giant could poke holes in the talk of a monopoly. Other onlookers as far back as 2017 suspected that government intervention could be imminent.
But in an election year, the sour relationship between Amazon, Jeff Bezos and President Trump could heighten.
“We expect the antitrust rhetoric to reach deafening levels during this presidential election year, while Amazon’s relationship with the White House remains the most precarious within Big Tech,” analyst Brian White wrote in a note.
Monness Crespi Hardt rates Amazon stock buy with a $2,250 price target.
President Trump has singled out Amazon Chief Executive Jeff Bezos on Twitter because of Bezos’ ownership of The Washington Post and with claims that the U.S. Postal Service was losing money on Amazon e-commerce package deliveries. Trump ordered a review of the USPS’s finances, but not much has been said on the topic for some time.
The Post Office had blamed the U.S. government, and not Amazon, for its losses.
More recently, Amazon blames Trump for losing the $10 billion Joint Enterprise Defense Infrastructure plan, or JEDI, contract with the Pentagon. JEDI instead went to Microsoft Corp. MSFT, -1.67% in October.
Amazon has filed a lawsuit over the contract.
Amazon is scheduled to announced fourth-quarter earnings on Thursday after the closing bell. D.A. Davidson analysts led by Tom Forte say they’ll be listening on the call for comments about this appeal. The JEDI contract is “what we consider to be the company’s biggest loss since its inability to secure government support of its New York City HQ2,” analysts said.
D.A. Davidson thinks there are two factors that will help Amazon in the antitrust fight: the company’s investments in shipping, which would position it to “break the duopoly” between FedEx Corp. FDX, -3.62% and United Parcel Service Inc. UPS, -1.49% in the U.S.; and its growing advertising business, which will snap the stranglehold that Google and Facebook have on that category.
“[These are] excellent arguments for Amazon on its efforts to promote more competition, which should provide protection against an increasingly hostile global regulatory environment for big technology, including Amazon,” analysts wrote.
D.A. Davidson rates Amazon stock buy with a $2,550 price target.
Amazon has an average buy rating and average target price of $2,196.27, according to 50 analysts polled by FactSet.
Here are some other things to look for in Amazon earnings:
Earnings: FactSet is guiding for earnings per share of $4.05, down from $6.04 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects EPS of $4.48.
Amazon has missed the FactSet EPS consensus the last two quarters.
Revenue: FactSet is guiding for revenue of $86.02 billion, up from $72.38 billion the previous year.
The Estimize outlook is for $86.45 billion.
Amazon has beat the FactSet consensus the last four quarters.
-One-day shipping is going to be bigger than analysts think. “We expect another record revenue holiday quarter, which could eclipse the high end of guidance thanks to share gains from the impressive, aggressive, one-day shipping rollout,” wrote Benchmark analysts in a Monday note.
Amazon has already said the holiday season was “record breaking,” though, as usual, it didn’t provide sales numbers to back that up.
That there will be margin pressure because “let’s face it, one-day delivery is expensive,” Benchmark said. But they say, as other analysts have, that the pressure is worth it.
Amazon has said it would spend more than $800 million to make one-day shipping happen.
Benchmark rates Amazon stock buy with a $2,300 price target.
-SunTrust Robinson Humphrey analysts think the shift to one-day shipping is “underappreciated” in current estimates.
“[W]e believe the company can actually sustain, and potentially accelerate its top-line growth, given the impact to-date on unit growth, and what we observed in 2005 onward following the launch of free two-day shipping,” analysts wrote.
Free two-day shipping for Prime members was launched in 2005, and the compound annual growth rate (CAGR) for the next five years was 5%, analysts say.
“Overall, we view this set up positively, and believe top-line outperformance in the retail business will drive the stock’s outperformance in 2020,” SunTrust said.
SunTrust rates Amazon stock buy with a $2,350 price target.