Three Challenges Amazon Faces in the Coming Years

July 5, 2019
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Amazon (NASDAQ: AMZN) is the most valuable retailer in the United States. The company has gone from strength to strength, diversifying from book sales into full-range e-commerce, and now the business even sells cloud services and operates a streaming television platform.

The company is a darling of the stock market and frequently receives BUY ratings from top analysts. Amazon stock has grown 29.10% year to date, outpacing the major benchmarks.

Despite all its success, the retail giant still faces challenges, and the following are the biggest ones that current and prospective investors need to know about.

Some Politicians Want a Company Breakup

Large tech companies have come under fire in recent months. Some politicians believe that the biggest companies have too much power in their markets, which stifles competition.

Senator Elizabeth Warren, a Democratic presidential candidate, wants to break up companies like Amazon, Facebook, and Microsoft. Warren claims that Amazon and its peers have “tilted the playing field against everyone else, and in the process, they have hurt small businesses.”

While Amazon’s structure is safe today, a change in government could lead to higher scrutiny of its business practices, particularly when it comes to mergers and acquisitions.

Amazon’s Taxes Have Been Questioned

Despite being one of the most valuable companies in the world, Amazon pays only a small percentage of its earnings in tax. Former Vice President and current Democratic hopeful Joe Biden said this year that “No company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth.”

Amazon is fully tax compliant, but it has become a key target for politicians who want to see corporate America take on more of the tax burden.

President Trump Wants Amazon to Pay More for the Postal Service

Even the President has been critical of Amazon. The Commander in Chief authorized a federal task force to investigate the finances of the Postal Service in relation to how Amazon uses its services. Trump believes that Amazon takes advantage of the agency through a confidential delivery agreement.

Amazon has recently started to implement its own delivery services, even offering incentives for employees who create their own delivery businesses. This has been seen as a direct response to the taskforce investigation.

Amazon’s Future Will be Politically Charged

Amazon isn’t in a position where its growth and market share would be threatened. However, it will face heavy political scrutiny in the coming years, especially if it continues to expand at its current rate.

In addition to company performance and potential, investors should take the political landscape into account when making decisions on this stock.

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