Amazon.com Inc (NASDAQ:AMZN) shares retreated on Thursday morning after an online story suggested President Trump “wants to go after” the e-commerce giant.
The article, which was published on axios.com, said Trump is “obsessed” with Amazon and has openly discussed clamping down on the company’s tax treatment.
Third-party sales tax
A source quoted by Axios said: “He’s wondered aloud if there may be any way to go after Amazon with antitrust or competition law.”
The story spooked investors, sending shares down more than 5% at the opening bell. The stock has recovered slightly since, and is now down 1.3% to US$1,415.64.
The gist of Axios’ article was that Trump wants to find a way of making Amazon, and its vendors, pay more taxes, claiming that the company has been getting a “free ride from taxpayers” for too long.
Stifel analyst Scott Devitt thinks the story is rubbish though and doesn’t expect any potentially damaging tax changes to be forthcoming.
“President Trump’s publicly shared issues have focused on the lack of sales tax collection among third-party sellers and Amazon’s use of the U.S. Postal Service (USPS),” wrote Devitt in a note.
“We don’t believe a nationwide implementation of sales tax collection for third-party merchants would have any impact on Amazon’s gross merchandise volume growth. In fact, Amazon already broadly collects sales tax on its own inventory.”
Consumers trust Amazon
Away from Trump, the analyst also points out that, unlike some other consumer internet companies, Amazon is relatively drama-free at the minute and has a loyal customer base.
“Consumer Internet companies that respect consumers will win over the long-term, in our view. Those companies that have historically abused the relationship with consumers are at risk.”
Devitt adds: “We don’t believe investors fully understand how recent events change everything and how important it is to be invested with the internet companies that have a long history of building trust with consumers.”
The analyst rounds up the note by saying that the stock is likely to ease back in the near-term given the strong run the shares have been on for the past year or so.
“We would be buyers of Amazon shares at current levels, if the goal is long-term outperformance.”