Amazon Hit By Antitrust Storm: Stock At 3-Month Low, 5 Analysts' Takeaways

Amazon.com, Inc. AMZN is currently facing an antitrust lawsuit jointly filed by the Federal Trade Commission (FTC) and 17 state governments on Sept. 26.

These legal actions allege the e-commerce and technology giant is wielding monopolistic power within the market and employing anti-competitive tactics to preserve its dominance.

The FTC and the states contend Amazon’s actions are inhibiting competitors and sellers from reducing prices, deteriorating product quality, overcharging sellers, impeding innovation and creating barriers to fair competition.

FTC chair Lina M. Khan emphasized the gravity of the situation, stating, "Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies."

In response, Amazon Senior Vice President David Zapolsky defended the company’s practices, asserting it has spurred competition and innovation within the retail industry, resulting in a wider product selection, lower prices and expedited delivery services for consumers.

Shares of Amazon were 1.4% lower on Wednesday as of midday trading in New York, hitting the lowest levels since June 21, 2023. In September, the tech giant shed 10% of its value, marking the worst monthly performance since December 2022.

Chart: Amazon Hits 3-Month Lows, Dips Below 50-Day and 100-Day Averages, Approaching Oversold RSI Territory

Amazon.com: Analyst Perspectives and Stock Outlook

Telsey Advisory Group (TAG) recognizes the FTC’s apprehensions about how Amazon deals with its sellers, emphasizing the relevance of this matter, particularly if Amazon is indeed implementing punitive actions. Nonetheless, analysts note sellers do possess alternative platforms available to them.

According to analyst Joseph Feldman, Amazon’s expansion into diverse sectors, including groceries, healthcare/pharmacy, fashion and advertising, is anticipated to be a significant catalyst for its growth. Consequently, TAG maintains its “Outperform” rating for Amazon, accompanied by a $160 price target.

Mizuho Securities views the lawsuit as a potential source of headline risk rather than a substantial threat to Amazon’s business operations. Managing Director James Lee believes that while the lawsuit may lead to monetary penalties or alterations in some practices, its impact on the company’s fundamental structure is expected to be minimal. Accordingly, Mizuho maintains a price target of $180.

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Wedbush‘s analyst Scott Devitt asserts that any significant restructuring of Amazon’s operations is unlikely to result from the FTC’s lawsuit. Instead, the analyst sees the legal action as an opportunity for investors to buy Amazon on dips. Wedbush remains optimistic about Amazon’s long-term prospects and maintains a one-year price target of $180.

According to Rosenblatt, the lawsuit is not expected to have an immediate impact on Amazon’s stock performance unless the company’s responses prove unexpectedly weak.

“Government antitrust is racking up losses, from Microsoft Corp.‘s MSFT acquisition of Activision, to the belated and failed challenge of Meta Platforms Inc.’s META acquisitions of WhatsApp and Instagram, highlighting the limits of Khan’s efforts to probe new legal theories,” Rosenblatt’s Barton Crockett writes in a note.

Rosenblatt has a Buy rating and says “We assume Amazon can trade in 9 years at a 15x forward multiple, which, NPV’d, rounds to $184 in a year.”

Citigroup says the lawsuit centers on allegations of anti-discounting practices and restrictions on sellers and other online retailers from offering lower prices than those on Amazon’s platform, while also incentivizing sellers to attain Prime eligibility for their products. Citigroup acknowledges the risks associated with the lawsuit but reiterates a Buy rating with a $167 price target.

The average one-year price target established by Wall Street analysts covering Amazon stands at $172, representing a 39% increase compared to the present valuation.

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