Will FTC Lawsuit End Up Breaking Amazon? Analyst Says Unlikely

Wedbush analyst Michael Pachter reiterated Amazon.com Inc AMZN with an Outperform and a $180 price target.

The Federal Trade Commission is reportedly preparing to file an antitrust lawsuit against Amazon, likely to hit by September. 

According to recent media reports, the case will focus on several aspects of the Amazon marketplace and may suggest structural remedies that could result in a company breakup. 

However, the analyst thinks an outcome that materially alters the structure of the business is unlikely as the historical application of antitrust legislation over the past half-century has largely favored businesses that improve consumer welfare. 

Further, he believes there is evidence that U.S. retail continues to function as a highly competitive online and offline market despite Amazon's success. 

The analyst opted to become buyers of Amazon shares on any weakness related to the headlines of an FTC case. 

The upcoming FTC lawsuit will likely target Amazon's marketplace. According to media reports, the FTC's forthcoming lawsuit will focus on broad elements of Amazon's marketplace. 

The analyst thinks the FTC faces a challenging road ahead, given the benefits Amazon brings to consumer welfare through competitive pricing, selection, and industry-leading delivery services. 

Further, despite Amazon's success, the U.S. retail market remains highly competitive both offline and online, with large retailers replicating Amazon's marketplace business model in addition to digital enablers like Shopify that have powered hundreds of billions in GMV outside of Amazon's ecosystem. 

The analyst also flagged that Walmart Inc WMT has a significantly larger 1P business than Amazon, in addition to having a third-party marketplace that offers services to sellers. 

There is still ample opportunity within eCommerce outside of Amazon for brands/sellers of all sizes, as evidenced by the success of over two million Shopify merchants that are on pace to generate ~$230 billion in GMV this year.

Recent large-scale or platform entrants like Temu or Shein prove that U.S. eCommerce remains highly competitive despite Amazon's market share leadership.  

Price Action: AMZN shares are trading lower by 2.73% at $140.77 on the last check Friday.