The Federal Trade Commission (FTC) is poised to file an antitrust lawsuit against Amazon, according to sources familiar with the matter. Despite this development, shareholders need not panic as there could be a silver lining. The online retail giant has reportedly not offered any concessions to the FTC during their recent talks, leading to speculation that measures may be proposed to break up the company.
Amazon has yet to comment on the situation. However, analysts at D.A. Davidson believe that shareholders might actually celebrate the news. They estimate that if Amazon were to be divided into three separate entities – its retail operation, a third-party retail platform, and its cloud-computing business – the stock could be valued between $148 and $193 per share.
This calculation is based on the premise that maintaining Amazon in its current form would make it increasingly difficult to achieve a compound annual growth rate of 10-20% and sustain its premium valuation. In premarket trading on Wednesday, Amazon’s shares experienced a slight decline of 0.7%, reaching $136.37.
It is worth noting that discussions surrounding the breakup of Amazon are not new. In fact, the possibility was previously raised in 2018. However, the looming FTC lawsuit may force investors to seriously consider the implications of such a move. Other analysts have also estimated Amazon’s valuation in a breakup scenario to be around $200 per share.
Splitting up the company would not be a straightforward process. D.A. Davidson’s Tom Forte suggests that it could take over a decade to navigate this complex undertaking. Nonetheless, Forte points out that both Alphabet (parent company of Google) and Meta Platforms (owner of Facebook) have weathered antitrust lawsuits successfully while still delivering strong performances.
In conclusion, Amazon finds itself on the brink of potential legal action, but shareholders may find a silver lining in a breakup scenario. The future remains uncertain, but the company’s intrinsic value could see a boost if it chooses or is compelled to undergo a significant restructuring.