Amazon.com shares are down 0.7% in premarket trading Thursday after President Donald Trump tweeted his “concerns” about the company, citing the company’s tax payments, threat to traditional retailers, and relationship with the U.S. Postal Service.
Stifel analyst Scott Devitt argued following the tweet that Trump is wrong about the tax and USPS components. “In the U.S., Amazon collects sales tax on its owned inventory in all 45 states that have a state sales tax and Washington, D.C,” he wrote. “We believe POTUS is referring to third-party (3P) merchants that sell on the Amazon platform, accounting for ~50% of unit volume. This is not a new issue, and taxing 3P merchants actually favorably positions Amazon relative to its peers.”
Devitt argued that if Amazon were to collect tax on behalf of third-party sellers, that would make those products more expensive than Amazon’s own, favoring Amazon. As for the USPS, Devitt wrote that “Amazon does use USPS but, if an arrangement were to become uneconomic to Amazon, Amazon has plenty of options.” The company is in the process of building its own logistics network.
Devitt added that Trump is correct on the effect of Amazon on retailers because “efficient retailers have been displacing inefficient retailers since the beginning of time.” He reiterated his buy rating on Amazon shares and his $1,800 price target. The stock is up 64% over the past 12 months, while the S&P 500 SPX, -2.86% has gained 10%.
Source: Marketwatch