Amazon is at low risk of regulatory action, RBC says, though others believe it could be dismantled

Some experts fear government regulators will attack Amazon.com Inc. harshly at some point, possibly forcing the company to separate, but RBC Capital Markets is not seeing that happening.

“We believe the digital age allows for unique connectivity and mutually beneficial partnerships that seem either unlikely, or at the very least extremely difficult to disaggregate (eg, consumer businesses and Amazon businesses),” said writes analysts led by Brad Erickson, who believe the likelihood of regulatory action is low.

RBC launched Amazon to outperform with a price target of $ 4,150.

“Moreover, regulators arbitrarily limiting the ability of a particular business unit of one company to fund another would set an almost unthinkable precedent for
the desire of the global company to reinvest its profits in any additional business
opportunity.”

There have been discussions in the past on Amazon and the threat of antitrust action. And more recently, the focus has been more and more on tech companies.

See: Amazon is the largest clothing seller in the United States as questions arise as to whether the company should be dissolved

“Regulatory review is inevitable, but in our opinion carries a relatively low risk to the value of the shares over the long term,” RBC wrote.

Analysts are optimistic about Amazon’s advertising business and see the e-commerce giant gaining more stakes in the years to come.

Recent Wells Fargo Report Says Amazon Is Now The Largest Seller Of Clothing In The United States Marketing forecast that Amazon will account for 41.4% of e-commerce sales in the United States in 2021. Walmart Inc. WMT, number two, is expected to grow to 7.2%.

Amazon’s fast delivery is key.

“Given the initiatives taken in the United States and around the world to reduce shipping times, we see this as a key tool to drive conversion and lead to e-commerce share gains above market,” RBC said.

“The pandemic has hampered the company’s ability to catch up to day-long demand in the United States, but we believe recent hiring announcements indicate these capacity constraints should be resolved by the start of the year. next year.”

And: Buy early and expect to pay more: Supply chain issues could be a stumbling block for optimistic holiday shopping forecasts

Don’t miss: Supply chain issues determine Salesforce forecast for 20% price increase for the holiday season

And even if the company were to go their separate ways, RBC doesn’t care about individual entities.

“[A]After talking to the company, we came away more confident that there is a clear technological and technical divide between AWS and the consumer sector, ”the note said.

“We wondered if one pulls the other and / or if AWS’s margins might reflect some wording of overhead – we don’t think that’s the case and, therefore, the companies’ P&Ls. separate would be virtually identical to the current segment operating income disclosure. . “

Amazon stock has edged up 0.8% for the year to date while the S&P 500 SPX index,
+ 1.15%
gained 16%.


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