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Over the past week, President Donald Trump has engaged in something of a one-man attack against the online retail giant Amazon.com Inc., repeatedly criticizing it and Jeff Bezos, the company’s founder, over a variety of issues. Bezos also owns the Washington Post, a publication Trump has criticized, and which he has repeatedly referred to as the “Amazon Washington Post.”
The tweets have had an impact, contributing to a 7% decline in the stock AMZN, +1.33% over the past month, a slump that spread to the broader market and led major indexes like the S&P 500 SPX, +1.16% and the Nasdaq COMP, +1.45% lower.
However, rather than being concerned by this most high-profile of critics, some Amazon investors are enjoying the show.
Their advice? Fire away, Mr. President.
While Trump’s tweets are viewed as a short-term headline risk, one that can’t be anticipated ahead of time, it is seen as extremely unlikely that the tweets will eventually—or ever—lead to the kind of enacted legislation that could have a meaningful and long-term effect on the company. And as the Amazon continues to grow at a rapid clip, bulls are using the tweet-related pullbacks as an excuse to scoop up the stock at what they describe as a relative discount.
See also: Don’t trade the tweets: Why Amazon investors can ignore Trump’s ‘concerns’
“We’ve been adding to Amazon in the correction because we think the stock decline has no fundamental basis. The main reason it has been falling is because of tweets from the president, but there’s no popular support for punitive action against Amazon, and there’s little he can do that wouldn’t require Congress, which wouldn’t pass such legislation,” said James Wang, a research analyst at ARK Invest, which has about $4 billion in assets and has owned Amazon as a top holding since 2014.
Wang said that despite any short-term volatility, which may occur as a result of the tweets or broader volatility in the technology and internet space, he expects Amazon to continue benefiting from a long-term shift to online retail from brick-and-mortar stores.
While having a sitting president single out a stock for criticism is extremely unusual—though hardly unprecedented—analysts said this wasn’t the kind of headwind that the headlines may indicate.
For one thing, frequent Trump targets against the company have been disputed or seen as false. That means the president may not be in a place to enact changes even if he wanted to. Thus far, Trump hasn’t provided any concrete examples of the changes he might like to implement, and the White House has said it has no specific policies or actions under consideration related to Amazon.
Last week, a Trump tweet charged that Amazon wasn’t paying its fair share of taxes and that it was hurting the U.S. Postal Service, something he said “only fools or worse” disagreed with.
Analysts and Federal regulators say the Postal Service actually makes money with Amazon shipments, while a recent New York Times report indicated that Amazon is “collecting sales tax in every state that has one.” Furthermore, addressing these factors would be difficult, if not impossible. Instituting changes to the tax code would require congressional approval. That is something that would undoubtedly be extremely difficult, given last year’s tax-reform package, which had far more unified support from the Republican Party, still had trouble passing. Meanwhile, Trump can’t tell the USPS what kind of contract to sign with Amazon, as it operates independently.
Check out: Amazon not likely to pay higher Postal Service rates despite Trump attacks
“This is the new normal; investors should expect that Trump might zero in on a company, down to the level of what it pays in taxes,” said Peter Andersen, the founder of Andersen Capital Management, which advises $630 million in client assets and owns Amazon. “However, tweets alone won’t impact, let alone destroy, the incredible value that a company like Amazon offers. In the meantime, the tweets create a buying opportunity for those who believe the company’s model is viable.”
When asked if he would welcome additional tweets that could deepen the buying opportunity, Andersen laughed and called that “an interesting way of security evaluation.”
Even with the recent volatility, the stock remains sharply higher for the year, having gained about 20% thus far in 2018 and 54% over the past 12 months. Given its weight in the major indexes, Amazon has been the single-biggest boost to the overall market in 2018.
For some analysts, those gains are a bigger concern than anything tweeted from the Oval Office. Currently, Amazon has a sky-high price-to-earnings ratio of 228.34, with a price-to-sales ratio of 3.82. The S&P’s P/E is 21.57 and the benchmark index has a P/S of 2.
“Trump’s tweets aren’t going to materially change the economic model for Amazon. He’s going to be a pest as long as Bezos owns the Washington Post, and that’s a reality the company will have to deal with, but he won’t get congress to pass an Amazon-only law that impacts this company and no one else,” said James Meyer, chief investment officer at Tower Bridge Advisors.
“However, the stock is priced for perfection, with a valuation that is highly dependent on how big and profitable it can get some years down the road. That’s highly speculative territory.”