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Amazon.com, Inc. (AMZN - Free Report) is the latest among the FANG stocks to take a beating. The company’s shares plummeted 4.4% on Wednesday and erased $30 billion of its market capitalization after the news website Axios reported that President Donald Trump wants to take on the company’s growing powers and its tax treatment.
Trump has long been arguing that the e-commerce giant has been getting an unfair tax treatment compared with brick-and-mortar retailers, which have been suffering the Amazon onslaught for quite some time now. Moreover, Trump has always been critical of Amazon and its CEO Jeff Bezos, expressing time and again how much he dislikes the company. However, White House press secretary Sarah Huckabee Sanders denied that the administration is planning anything against Amazon. "We have no announcement and no specific policies we are pushing for," Sanders said, related to Amazon.
That said, it’s still unclear what Trump will ultimately plan or do with Amazon. If he really decides to implement an Internet tax, Amazon’s revenues will be affected and its customers will have to shell out more. This is because Amazon will likely pass on its extra cost burden to its customers.
Trump Versus Bezos
Trump’s dislike for Amazon and Bezos isn’t unknown and dates back a long time. On Wednesday, the company’s shares nosedived once again on reports of Trump planning to take on the Internet retail behemoth and its tax treatment. This saw its shares tumbling as much as 7% at one point of the day and almost $53 billion of its market capitalization being wiped out, before it closed the day at down 4.4%.
The selloff was fueled by fears of a prospective Internet tax, which would cut heavily into the profits of the company. Now, this was not something out of the blue. Back in August 2017, Trump had tweeted: “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt - many jobs being lost!"
In fact, he had also said that the United States Post Office is losing billions of dollars every year by charging the likes of Amazon and others a pittance to deliver their packages. This, Trump suggested is only making Amazon richer. Interestingly, Trump’s dislike is perhaps more for Bezos, who also owns Washington Post. Trump has often criticized Washington Post and on one occasion, misleadingly referred to it as “Amazon Washington Post.”
A tweet by Trump, last year, read: "The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying Internet taxes (which they should) is FAKE NEWS!" Understandably, Trump doesn’t like Amazon’s business style and the latest report is further proof of that.
Amazon Changing the Retail Landscape
Amazon undoubtedly has changed the retail landscape in the last few years. The company has grown from strength to strength with innovations in the delivery space and by bridging the gap between online and offline retail business. Amazon’s shares have increased 63.7% in the last year and 2.4% year to date. Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This definitely is giving other brick-and-mortar giants like Walmart Inc. (WMT - Free Report) , Target Corporation (TGT - Free Report) , Dollar General Corporation (DG - Free Report) and Dollar Tree, Inc. (DLTR - Free Report) a run for their money. This is especially so because the traditional incumbents are constantly striving to stay in the race.
The biggest move in the brick-and-mortar space was made by Amazon when it acquired Whole Foods for $13.7 billion in 2017. Moreover, Amazon recently started free, two-hour delivery from Whole Foods’ stores to its Prime members in four cities — Austin, Dallas, Cincinnati and Virginia Beach.
Of course Amazon has established its dominance in the online retail space and it’s not only the retail giants but also the smaller players that are suffering the most with many shutting shop. Michael Kors will be closing 100-125 stores over the next two years. Sears & Kmart closed 358 stores in 2017 and 63 in January 2018. Toys R Us is nearing closure too. Naturally, Trump’s concern is for brick-and-mortar stores, which are finding it difficult to survive the Amazon onslaught.
But What About Amazon’s Profits?
Although it really isn’t known what Trump plans to do, an Internet tax will dent Amazon’s booming online business without an inkling of doubt. In 2017, Amazon accounted for 44% of all e-commerce sales and about 4% of total U.S. retail sales, according to CNBC’s One Click Retail study. The company’s e-commerce sales for 2017 are expected to grow almost $197 billion, reflecting a 32% increase from 2016. This says a lot about the company’s dominance in e-commerce retail. And a lot of this is because Amazon is spared from any Internet tax.
Moreover, according to the study, Amazon’s grocery sales in 2017 totaled $1.5 billion, up 33% from 2016, thus making it an undisputed leader in the e-commerce space. Naturally, if an Internet tax ultimately comes to effect, Amazon’s profits are sure to take a hit. More taxes mean less profits or steeper prices in case the tax burden is passed on to consumers. This in its turn might cause a slump in sales.
In Conclusion
Trump’s dislike for Amazon has often come to the fore and the recent news has sparked fears in the minds of investors. An Internet tax certainly isn’t a good sign for the e-commerce giant. However, with nothing concrete on the table now, and the White House denying any imminent action against Amazon, investors can be a little more patient with the stock.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline. Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Can an Internet Tax Ruin the Amazon (AMZN) Story?
Amazon.com, Inc. (AMZN - Free Report) is the latest among the FANG stocks to take a beating. The company’s shares plummeted 4.4% on Wednesday and erased $30 billion of its market capitalization after the news website Axios reported that President Donald Trump wants to take on the company’s growing powers and its tax treatment.
Trump has long been arguing that the e-commerce giant has been getting an unfair tax treatment compared with brick-and-mortar retailers, which have been suffering the Amazon onslaught for quite some time now. Moreover, Trump has always been critical of Amazon and its CEO Jeff Bezos, expressing time and again how much he dislikes the company. However, White House press secretary Sarah Huckabee Sanders denied that the administration is planning anything against Amazon. "We have no announcement and no specific policies we are pushing for," Sanders said, related to Amazon.
That said, it’s still unclear what Trump will ultimately plan or do with Amazon. If he really decides to implement an Internet tax, Amazon’s revenues will be affected and its customers will have to shell out more. This is because Amazon will likely pass on its extra cost burden to its customers.
Trump Versus Bezos
Trump’s dislike for Amazon and Bezos isn’t unknown and dates back a long time. On Wednesday, the company’s shares nosedived once again on reports of Trump planning to take on the Internet retail behemoth and its tax treatment. This saw its shares tumbling as much as 7% at one point of the day and almost $53 billion of its market capitalization being wiped out, before it closed the day at down 4.4%.
The selloff was fueled by fears of a prospective Internet tax, which would cut heavily into the profits of the company. Now, this was not something out of the blue. Back in August 2017, Trump had tweeted: “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt - many jobs being lost!"
In fact, he had also said that the United States Post Office is losing billions of dollars every year by charging the likes of Amazon and others a pittance to deliver their packages. This, Trump suggested is only making Amazon richer. Interestingly, Trump’s dislike is perhaps more for Bezos, who also owns Washington Post. Trump has often criticized Washington Post and on one occasion, misleadingly referred to it as “Amazon Washington Post.”
A tweet by Trump, last year, read: "The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying Internet taxes (which they should) is FAKE NEWS!" Understandably, Trump doesn’t like Amazon’s business style and the latest report is further proof of that.
Amazon Changing the Retail Landscape
Amazon undoubtedly has changed the retail landscape in the last few years. The company has grown from strength to strength with innovations in the delivery space and by bridging the gap between online and offline retail business. Amazon’s shares have increased 63.7% in the last year and 2.4% year to date. Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This definitely is giving other brick-and-mortar giants like Walmart Inc. (WMT - Free Report) , Target Corporation (TGT - Free Report) , Dollar General Corporation (DG - Free Report) and Dollar Tree, Inc. (DLTR - Free Report) a run for their money. This is especially so because the traditional incumbents are constantly striving to stay in the race.
The biggest move in the brick-and-mortar space was made by Amazon when it acquired Whole Foods for $13.7 billion in 2017. Moreover, Amazon recently started free, two-hour delivery from Whole Foods’ stores to its Prime members in four cities — Austin, Dallas, Cincinnati and Virginia Beach.
Of course Amazon has established its dominance in the online retail space and it’s not only the retail giants but also the smaller players that are suffering the most with many shutting shop. Michael Kors will be closing 100-125 stores over the next two years. Sears & Kmart closed 358 stores in 2017 and 63 in January 2018. Toys R Us is nearing closure too. Naturally, Trump’s concern is for brick-and-mortar stores, which are finding it difficult to survive the Amazon onslaught.
But What About Amazon’s Profits?
Although it really isn’t known what Trump plans to do, an Internet tax will dent Amazon’s booming online business without an inkling of doubt. In 2017, Amazon accounted for 44% of all e-commerce sales and about 4% of total U.S. retail sales, according to CNBC’s One Click Retail study. The company’s e-commerce sales for 2017 are expected to grow almost $197 billion, reflecting a 32% increase from 2016. This says a lot about the company’s dominance in e-commerce retail. And a lot of this is because Amazon is spared from any Internet tax.
Moreover, according to the study, Amazon’s grocery sales in 2017 totaled $1.5 billion, up 33% from 2016, thus making it an undisputed leader in the e-commerce space. Naturally, if an Internet tax ultimately comes to effect, Amazon’s profits are sure to take a hit. More taxes mean less profits or steeper prices in case the tax burden is passed on to consumers. This in its turn might cause a slump in sales.
In Conclusion
Trump’s dislike for Amazon has often come to the fore and the recent news has sparked fears in the minds of investors. An Internet tax certainly isn’t a good sign for the e-commerce giant. However, with nothing concrete on the table now, and the White House denying any imminent action against Amazon, investors can be a little more patient with the stock.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline. Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>