Amazon should split retail and web segments to avoid anti-trust scrutiny, says Citi Research

Amazon.com Inc’s (NASDAQ:AMZN) share price has found itself at the mercy of US President Donald Trump’s tweets in the past. Trump has called for greater taxes on the company, saying that the e-commerce giant has been using the US Postal Service as its “delivery boy” and that the Washington Post, owned by Amazon CEO Jeff Bezos, has covered the Trump administration unfairly since Amazon lost a case involving internet sales taxes.

Citi Research analysts expressed concerns about the company facing anti-trust regulations, suggesting that Amazon split its retail and web services divisions to escape rising regulatory pressure.

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“There has been greater noise of late regarding the desire to investigate and potentially regulate the company,” said analyst Mark May said in a note shared by CNBC.

“A smaller market cap Amazon retail business may bring (slightly) less attention to its market size and dominance,” he added.

If separated, its retail business would be valued at around US$400bn while it’s Amazon Web Services segment would be worth around US$600bn, according to May.

May listed several other reasons a split may be the way to go, including improving shareholder selection, avoiding conflicts of interest and planning for Bezos’ succession.

The analyst noted that the company’s recent trillion-dollar valuation milestone and Bezos’ status as the world’s richest person wasn’t exactly low-key.

Nevertheless, Citi Research reiterated a Buy rating with a price target of US$2,250, calling the e-commerce titan a top pick.

Shares of Amazon were down more than 2% to US$1,924.21 in Monday afternoon trading.

Story by ProactiveInvestors