Trump’s Amazon Attack Continues; Analyst Shares Two Cents
Late Friday there were media reports that President Trump has been strong-arming the postmaster general to double the rate it charges Amazon (NASDAQ:AMZN) and other firms on packages shipped domestically. Trump alleges that Amazon is being subsidized by the Postal Service. However, Postmaster General Megan Brennan has warned that the request could massively complicate existing contracts between the USPS and companies like Amazon, many of which are reportedly reviewed by a regulatory commission.
GBH Insights analyst Daniel Ives commented, “While the timing and next steps of action were unclear, this latest news has added fuel to the fire of the potential boxing match on the horizon between Trump and Bezos & Co. around the distribution/cost that Amazon is charged by the U.S. Post Office in its all-important “last mile” delivery. This hot topic has become a major source of friction over the last few months between the Trump administration and Amazon with the U.S. Post Office’s infrastructure, pricing, and partnership with the e-commerce behemoth becoming front and center and thus making investors nervous that changes and cost increases could be on the horizon on this key distribution channel.
“Ultimately, we continue to estimate that roughly 40%-45% of Amazon’s packages are currently delivered through the U.S. Post Office channel on the last mile, which could go down to ~35% of total packages delivered over the next two years as initiatives such as Amazon Flex, Prime Now, and other distribution/logistics investments bear fruit in the field. With Amazon estimated to pay the U.S. Post Office in the range of $2 per package, there is a thought process within the Beltway among some that this rate should be closer to $3.50-$4.00 and more competitive with what Bezos & Co,” the analyst continued.
Ives reiterates a Highly Attractive rating on shares of Amazon, with a price target of $1,850, which represents a potential upside of 18% from where the stock is currently trading. (To watch Ives’ track record, click here)
Amazon has one of the best ratings by the Street. TipRanks reveals that AMZN has a Strong Buy analyst consensus rating with 36 Buy ratings and only one single Hold rating in the last three months. Meanwhile the average analyst price target of $1,860 suggests the stock still has upside potential of just over 18% from the current share price for the next 12 months.