Amazon vs. the FTC breakdown: Analysts say investors may win either way
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Needham advised investors on Thursday to buy Amazon (NASDAQ:AMZN) on any recent FTC-related weakness due to its view that there will be little near-term economic impact for the e-commerce giant.
Analyst Laura Martin noted that most experts think it will take the lawsuit two to three years to get to trial in the lower court, plus another three to five more years to work its way through the appeals process.
Martin said that most of the DC lawyers the firm spoke with believe any non-Kahn FTC would be reluctant to continue down this path, and would instead settle quickly and quietly. With the U.S. election coming up in 2024, Kahn could lose her FTC Chairman title to a Republican and the Amazon case could lose some of its momentum.
In the outlier case that Amazon (AMZN) is forced to be broken up, Martin and team still think Amazon (AMZN) investors could win as they become holders of pure play businesses instead of a big conglomerate with a forced mix of disparate businesses.
Needham goes back to the simple thesis that Buy-rated Amazon (AMZN) will be one the biggest beneficiaries of generative AI.
"Similar to the iOS ecosystem, we project that AMZN's economic value creation will be a 15% take rate of revenue upside plus cost savings from every company that uses any of the LLMs housed by AMZN's Cloud backbone. In fact, we believe that Cloud revs will be larger than eCommerce revs in 10 years, and that this will drive upside to AMZN's profit margins and FCF."
Seeking Alpha analyst Tradevestor also dismissed any concerns over the FTC lawsuit and gave nine reasons to buy the pullback, one of which was that the legal challenge could accelerate a spinoff of the AWS business.
On Wednesday, Amazon (AMZN) was formally sued by the Federal Trade Commission and 17 state attorneys general on Tuesday on charges that the e-commerce giant is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power. As widely expected, the FTC and the states claimed Amazon's (AMZN) actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing in the retail sector. The complaint alleges that Amazon (AMZN) violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging.
Shares of Amazon (AMZN) slipped 0.72% in premarket trading on Thursday and are down more than 4% for the week.

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