Amazon Faces a Potential Existential Threat That Could Hammer Its Shares, Doug Kass Reveals
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Version 0 of 1. "If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life." --Sen. John Sherman As mentioned late yesterday, despite the enormous success of "Prime Day," the continued expansion of product offerings and an all-time record stock price, Amazon.com Inc. (AMZN) is likely to face its greatest existential threat from regulatory agencies and legislators in Washington, D.C., over the next year: "I am shorting Amazon today because I have learned that there are currently early discussions and due diligence being considered in the legislative chambers in Washington, D.C., with regard to possible antitrust opposition to Amazon's business practices, pricing strategy and expansion announcements already made (as well as being aimed at expansion strategies being considered in the future). If I am correct, word of this could lower Amazon's shares by 10% overnight. And if expansion or pricing prohibitions are attacked for antitrust reasons (or for other reasons), a far more severe market impact is possible." -- Kass Diary, "Shorting Amazon" Background Here is more on Amazon from a July 11 column: "With the Whole Foods transaction, Amazon's vast power will be under the microscope. Is Amazon a productive change agent and force for the good of the consumer by virtue of a reduction in product prices? Or is Amazon's disruption of the general retail business a destroyer of jobs, moving previously productively employed workers into the unemployment line? ... It is my view that Amazon's shares should be sold on strength as the company could face regulatory restrictions in reaction to its expansion plans and customers who use the service could face a rising tax burden over the intermediate term. It is not clear to me, given the extended valuation, that investors will be so patient with this possible threat. Given the disruptions in jobs, malls and elsewhere, I wouldn't be surprised if the proposed acquisition and future acquisitions will be opposed by many, possibly including politicians and regulatory authorities. Note: Retail stores are closing with rapidity -- an estimated 8,000 stores in 2017 alone compared to about 4,000 in recession-savaged 2008 -- as the business landscape radically has changed due to Amazon's strategic alliances and business objectives and strategies.... Frankly, in the face of bona fide threats of regulatory and political opposition to Amazon, we against all odds finally may be facing "Peak Amazon," but for different reasons than many would have expected." - Kass Diary, "The Carnage in Retail: Opportunity or Game-Ender?" Three added points on Amazon, which is part of the Trifecta Stocks portfolio: More of What's Trending on TheStreet: Editors' pick: Originally published July 13. |