Amazon.com, Inc. (NASDAQ:AMZN) stock shifted higher out of the gate today as a broader rally boosted favorites in the tech sector, lifting the tech-heavy NASDAQ Composite in the process. Analysts continued their crusade to calm investors on Amazon stock, even as the battle pitting President Trump versus Amazon continued with yet another tweet.
Another tweet in Trump versus Amazon battle
Trump tweeted against Amazon again early this morning, blasting The Washington Post for one of its headlines about the imminent trade war with China. He again referred to the newspaper as “fake news” and “Amazon’s ‘chief lobbyist,'” a reference to the fact that Amazon CEO Jeff Bezos owns the Post.
The Fake News Washington Post, Amazon’s “chief lobbyist,” has another (of many) phony headlines, “Trump Defiant As China Adds Trade Penalties.” WRONG! Should read, “Trump Defiant as U.S. Adds Trade Penalties, Will End Barriers And Massive I.P. Theft.” Typically bad reporting!
— Donald J. Trump (@realDonaldTrump) April 5, 2018
Amazon stock bulls aren’t concerned about the Trump versus Amazon battle, as many are taking advantage of the pullback by adding to their positions. ARK Invest analyst James Wang told MoneyWatch that they’ve been buying more Amazon tock because they see “no fundamental basis” for the decline, citing the battle with Trump.
Amazon tax could be implemented
Analysts and market watchers are now weighing the potential outcomes from the Trump versus Amazon battle. The two key issues he has raised are taxes and the online retailer’s relationship with the U.S. Postal Service. Most analysts have already noted that sales tax is unlikely to convince consumers to stop shopping on Amazon. It’s generally believed that the tax issue Trump is referring to is about sales tax that isn’t always paid by third-party sellers doing business on the company’s platform because Amazon itself does collect sales tax on items it sells itself, which is roughly half of it business.
Morgan Stanley analyst Brian Nowak said in a note this week that investors are weighing the potential impact of “a more uniform state sales tax enforcement and collection” on Amazon due to the two bills currently under consideration and the Supreme Court case involving Wayfair. However, he also offered four reasons that this issue doesn’t concern him.
He explained that forcing third-party sellers to charge sales tax just places them on the same playing field as all other retailers and noted the importance of “platform loyalty and product elasticity.” Further, he said the Amazon tax issue isn’t exactly a new one and that the issue could end up posing a greater risk to third-party sellers and eBay instead.
What about the USPS?
The longer the Trump versus Amazon battle goes on, the more analysts and market watchers are focusing on the USPS side of the issue. The president is convinced that the postal service loses money on the deliveries it makes for Amazon, so some investors are concerned about what will happen to the contract between them, which Nowak said is believed to be up for renegotiation this year. However, he believes that both Amazon and the USPS benefit from their business relationship and doubts that the contract is unprofitable for the postal service. He does expect the USPS to ask for higher rates, but he also expects “rational” negotiations between them. On the other hand, he also sees a chance that the USPS will negotiate “hard,” noting that Amazon ended up paying Japan’s Yamata 40% more for shipping when Yamata negotiated the increase.
UBS analyst Eric Sheridan also believes that the USPS’s contract with Amazon is profitable despite Trump’s belief to the contrary. He spoke with former USPS Postmaster General Patrick Donahoe, who stated that the contract is indeed profitable for the postal service.
Amazon stock surged by about 3% in intraday trading today, climbing as high as $1,454.17 per share.
