DA Davidson Recommends Buying Amazon Weakness, Says Retail Giant Has 'Low Likelihood' Of Antitrust Headwinds

President Donald Trump's comments on Amazon.com, Inc. AMZN — coupled with overall market volatility — have resulted in a more than 4-percent selloff in the stock throughout March. But long-term investors should take advantage of the dip, according to D.A. Davidson.

The Analyst

D.A. Davidson's Tom Forte reiterated a Buy rating on Amazon's stock with an unchanged 12-18-month $1,800 price target and five-year price target of $2,450.

Amazon And Taxes

Trump's accusation that Amazon isn't properly collecting sales tax remains an "important issue," even though Amazon has multiple state agreements to collect sales taxes for first-party sales, Forte said in a research report. (See the analyst's track record here.) 

Consumers can still find ways to avoid paying sales taxes on Amazon's platform by purchasing third-party seller items that don't have a physical presence in their home state.

In fact, 51 percent of all units sold on Amazon in the fourth quarter were from third-party sellers, which implies there remains a "large amount" of taxes that are uncollected, Forte said. To counter this, many states have already passed or are considering regulations for marketplaces to collect sales taxes regardless of the physical locations of the buyer and seller.

"Further, and we can't be the only ones to see the irony, if President Trump was concerned about Amazon's tax burden, he may not have lowered the corporate tax rate," the analyst said. 

Amazon And USPS

Trump has also accused Amazon of taking advantage of the United States Postal Service. The president could be right in this case, Forte said: the analyst's multiple shipping industry sources he spoke with label Amazon's business relationship with the USPS a "sweetheart deal."

The USPS was losing billions before it took on a major role in delivering products for Amazon, and would still lose billions of dollars if Amazon decided overnight to discontinue its relationship, the analyst said. Amazon is building its own first-party delivery system, which will necessitate substantial capital over time — so investors would be prudent to continue monitoring developments between Amazon and USPS, Forte said. 

Is Amazon Killing The Competition?

Trump suggested Amazon is killing the retail competitive landscape, and he could be partially right, the analyst said: Amazon has "contributed to the demise" of some of the weakest retailers, like Toys R Us, Forte said. But at the same time, multiple retailers like Best Buy Co Inc BBY are thriving in the face of competition from Amazon.

Amazon's business model yields lower prices for consumers, which is the complete opposite of what can be expected from anticompetitive entities, Forte said.

Despite the president's public comments, there is a "low likelihood" of any negative antitrust impact to Amazon, the analyst said.

Price Action

Shares of Amazon were trading higher by 1.16 percent at the time of publication Tuesday.

Related Links:

How Amazon Actually Helps Keep The US Postal Service Alive

Here's Why Amazon Is 'Winning The Right Way' Despite Trump's Concerns

Photo courtesy of Amazon.