Threats of antitrust lawsuits and government intervention have been a concern for Amazon (AMZN) and its investors for years as the e-commerce giant gobbles up competition and appears more and more like a monopoly.
But all this came to a head on Tuesday as the US government announced via the Federal Trade Commission (FTC) that it is suing Amazon for anticompetitive business practices. So far 17 states support the lawsuit.
The FTC says that Amazon uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power. What is Amazon doing exactly that drew the ire of the US government, though? It’s not a result of sheer size – rather, exclusionary conduct like:
- Lowering prices beyond what competitors can feasibly keep up with
- Overcharging sellers and leaving them struggling to stay afloat
- Stifling innovation in the space
Both sides of the fence released statements. Chair of the FTC Lina M. Khan says that the practices Amazon employs are detrimental to not just the hundreds of thousands of businesses who use the marketplace to reach their customers, but also the tens of millions of customers themselves who aren’t getting the shopping experience they deserve.
On the other hand, Amazon’s senior VP of global public policy and general counsel David Zapolky denounced the lawsuit with haste. He says that the lawsuit sets a dangerous precedent in which there will be fewer products to choose from, higher prices & slower deliveries for consumers, and fewer ways for businesses to reach their customers.
The news sent shares of AMZN trading 3% lower in yesterday’s trading session, contributing to what has been a 5% loss over the past month. It remains to be seen how all this will play out in court. But in the meantime, what should investors or prospective traders do about this news?
We’ve taken a look at AMZN through the VectorVest stock analyzer and have 3 things you’re going to want to see before you do anything else.
AMZN Has Fair Upside Potential, Good Safety, and Poor Timing Right Now
VectorVest simplifies your trading strategy by giving you clear, actionable insights in just 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on a scale of 0.00-2.00 with 1.00 being the average to allow for quick and easy interpretation.
To make things even simpler, though, the system issues a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock, at any given time. Here’s what we’ve unearthed for AMZN:
- Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (projected three years out) to AAA corporate bond rates and risk. It offers far superior insights than a simple comparison of price to value alone. As for AMZN, the RV rating of 0.98 is slightly below the average but considered fair nonetheless.
- Good Safety: The RS rating is an indicator of risk and comes from an analysis of a company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. As for AMZN, the RS rating of 1.24 is considered good.
- Poor Timing: The biggest issue for AMZN right now is the negative price trend that has gripped the stock recently. The RT rating of 0.75 is poor and speaks to this weak performance. The rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.00 is right at the average. This begs the question: should you buy, sell, or hold this stock right now?
Rather than playing the guessing game or letting emotion influence your decision-making, why not get a clear answer based on a tried and true system that has outperformed the S&P 500 by 10x over the past two decades and counting?
Get a free stock analysis today at VectorVest and make your next move with confidence!
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VectorVest advocates buying safe, undervalued stocks, rising in price. The anticompetition lawsuit rumors have finally come to fruition after years of rumors for AMZN. Legal battles aside, the stock has fair upside potential, good safety, and poor timing right now.
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