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Amazon.com, Inc. (NASDAQ:AMZN): Is There More than just Pre-election Populism to the Anti-Trust Rhetoric?

Amazon.com, Inc. (NASDAQ:AMZN) has heard this rhetoric before. Over the weekend, President Trump came out and hinted at possible antitrust action against Amazon, Google, and Facebook. It may just be populist jibing ahead of an important election. Or it may be more.

Our suspicion is that it is just populist jibing ahead of an important election. But, for those who haven’t been following the evolution of this narrative, there is something real here.

Amazon.com, Inc. (NASDAQ:AMZN) is interesting precisely because it doesn’t seem to have any real competition for its main revenue streams. That’s also why Facebook and Google are interesting. It represents perhaps the core long-term investment thesis in each case.

 

Smoke and Fire?

These stocks are often linked with Apple and Netflix as the so-called FAANG stocks – the mega-cap mega-growth stories in the technology space. But Apple and Netflix both have to win by execution amid a storm of competition. And one expects they will eventually succumb to the pack as the world catches up with them.

But Amazon, Google, and Facebook effectively stand alone in their respective fields of dominance. And, more to the point, they have each evolved mechanisms to maintain that status. They are a bit like plants in different gardens that have developed the ability to poison the soil for all other plants in their garden, leaving them to soak up all of the water, nutrients, and available sunshine in their respective vicinities.

In addition, they have enough financial power to quickly purchase any other entity that begins to threaten that status.

In the old days, we would quickly move to break up such entities. But these companies carry this out in a manner that falls outside of the technical definitions we rely upon to identify monopolies. So, they have rolled on down the road with little challenge in this respect.

To understand how that might change in the future, we would suggest reading up on the collected intellectual works of one Lina Khan, a new player at the FTC who rose to notoriety in 2017 when she published a sort of manifesto discussing how we might move to update our definition of monopoly in a manner that would allow us to break up Amazon.

And, as you are likely aware, the relationship between Jeff Bezos and Donald Trump is acrimonious at best.

Given that the investment thesis for longer-term players in Amazon equity is almost entirely sound but for this consideration, further rhetoric, should it continue following the election, from the administration should be taken as deadly serious for this stock. This is one issue that we would suspect could be in alignment between the White House and a potential Pelosi-led House.

Amazon.com, Inc. (NASDAQ:AMZN) managed to rope in revenues totaling $56.6B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top-line growth of 29.3%, as compared to year-ago data in comparable terms.

In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($30.4B against $55.3B, respectively). However, no one is going to penalize the company for that statistic anytime soon.

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