According to a report by The Guardian, the U.K. competition watchdog will investigate e-commerce giant Amazon (AMZN) and Alphabet’s Google (GOOGL) over concerns that the companies have not taken sufficient action to deal with the issue of fake reviews on their websites.
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The Competition and Markets Authority (CMA) will decide whether the Silicon Valley companies have violated consumer law by not doing enough to protect their customers. If the investigation finds that the companies have broken consumer law, the CMA could secure formal commitments from them or pursue legal action. (See Alphabet stock chart on TipRanks)
The CMA said sellers use misleading and fake reviews to increase their star ratings. This impacts the prominence of their name and products when consumers search for goods. (See Amazon stock chart on TipRanks)
CEO of the CMA, Andrea Coscelli, said, “Our worry is that millions of online shoppers could be misled by reading fake reviews and then spending their money based on those recommendations. Equally, it’s simply not fair if some businesses can fake five-star reviews to give their products or services the most prominence while law-abiding businesses lose out.”
Jefferies analyst Brent Thill recently maintained a Buy rating on Amazon with a price target of $4,200 (23.5% upside potential). The analyst said the company’s aggressive logistics investments would help expand its same-day delivery service.
Overall, Amazon has a Strong Buy consensus rating based on 33 unanimous Buys. The average Amazon analyst price target of $4,281.25 implies 26% upside potential from current levels. The company’s shares have gained 27% over the past year.
According to TipRanks’ Smart Score rating system, Amazon scores a “Perfect 10”. This suggests that the stock is likely to outperform market averages.
Similarly, Stifel Nicolaus analyst Scott Devitt recently reiterated a Buy rating on Alphabet with a price target of $2,700 (10.6% upside potential). The analyst said the company’s plan to begin phasing out third-party cookies from its Chrome browser from mid-2023, as opposed to the earlier plan to commence the phase-out in 2022, will impact the industry much more than Google itself.
Overall, Alphabet has a Strong Buy consensus rating based on 28 Buys and 2 Holds. The average Alphabet analyst price target of $2,785.97 implies 14% upside potential from current levels. The company’s shares have gained 75.4% over the past year.
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