Amazon under Pressure: Does This Signal a Buying Opportunity?
Apparently, Donald Trump and Amazon.com have some bad blood.
However, don’t let it scare you away from buying the stock. Instead, on Trump-tweeting induced weakness, it’s actually a solid opportunity.
In late February 2017, the President tweeted his concerns that Amazon does not pay enough taxes and its pays too little to the U.S. Postal Service to deliver. The President also argued that Amazon’s current tax deal “is closing stores all over the country.”
“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country...not a level playing field,” he tweeted.
As a result of the tweet, shares of Amazon plunged from a high of $1,546 to $1,371 in days on fears that Trump could act on his obsession with Amazon’s tax treatment.
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However, we have to remember this isn’t the first presidential attack on the stock from Trump.
We’ve seen this movie before… and each time the stock has exploded higher.
“Believe me, if I become president, do they have problems. They’re going to have such problems,” Trump said in February 2016.
By the election, such a fear sent Amazon from $833 to $710.
By May 2017, the President told Fox News:
“Amazon is getting away with murder tax-wise.”
That same month, he also accused the company of using the Washington Post, which CEO Jeff Bezos owns, to keep company taxes low, and said that AMZN has “got a huge antitrust problem because he’s controlling so much, Amazon is controlling so much of what they are doing.”
However, once the fear was priced into the Amazon stock, it ran from a low of $710 to a January 2017 high of $843 – a 19% win for patient investors.
Then, on June 28, 2017 Donald Trump again tweeted his distaste for the stock, sending it to $951.
However, once the tweet was fully priced in, the stock became a buying opportunity. In fact, the stock would rally from a low of $951 to a high of $1,083 – a 14% win.
On August 16, 2017, Trump tweeted:
“The question raised is whether the tweet is indicative of a potential policy shift by the Trump Administration to focus on the online retailer as a monopoly with anti-trust issues. That, of course, then raises the fear of a potential government mandated break up.”
As a result, shares of Amazon lost $6 billion in a matter of minutes.
Once that was priced in, the stock ran to an all-time high of $1,617.54.
From what we’ve seen historically, any erosion of value quickly becomes a buying opportunity because of a very easily seen pattern.
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