Investigations and lawsuits are not new for Amazon (AMZN), as the company consistently faces these challenges from various regulatory bodies. According to the TipRanks Risk Factors tool, one of AMZN’s main risk categories is Legal and Regulatory, which accounts for 25% of the total 24 risks identified. Moreover, the legal risk exposure is much higher than the industry average of 18%, which is cause for concern.
Within the legal and regulatory category, litigation and legal liabilities, regulations, and taxation & government incentives account for 13%, 8%, and 4% of total risks, respectively. Investors should note that AMZN, being a global tech giant, is exposed to lawsuits and government investigations on issues like patents, labor, antitrust, and data protection. These legal challenges could impact its performance.
Another risk Amazon faces stems from unclear laws regarding the liability of online service providers. While the company has policies to prevent fraudulent seller activities, any failure in these safeguards could harm its business, potentially leading to civil or criminal liability for unlawful actions by its sellers.
Looking at Amazon’s Other Risk Categories
Like the legal and regulatory risk category, Finance and Corporate also accounts for 25% of the total risks. However, the risk’s exposure is lower than the industry average of 38.9%, suggesting effective risk management.
Production risks are next most significant for Amazon, accounting for 17% of total risks. Moreover, Technology and Innovation, as well as the Ability to Sell, each contribute 13% to the company’s overall risk profile. Lastly, Macro and Political factors make up 8% of Amazon’s total risks.
Despite operating in a complex environment with numerous potential risks, Amazon has demonstrated a strong ability to manage these challenges. The company’s successful risk management practices position it well for continued long-term performance.
Is AMZN a Buy Right Now?
Turning to Wall Street, AMZN has a Strong Buy consensus rating based on 45 Buys and two Holds assigned in the last three months. At $224.38, the average Amazon price target implies about 20% upside potential. Shares of the company have gained 23.4% year-to-date.
