Europe isn’t a paradise for many companies at the moment. Specifically Amazon.com, Inc. (NASDAQ:AMZN).
For starters the online retailer is undergoing investigation for tax evasion and enduring employee strikes. These could cost Amazon.com, Inc. (NASDAQ:AMZN) an additional $900 million in taxes and 8,000 workers in Germany.
However, often in the depths of chaos buying opportunities are found. And Amazon.com, Inc. (NASDAQ:AMZN) is a buy. Here is a breakout of Amazon’s two compelling weaknesses, but why its overpowering strengths win the day.
Weakness #1: European unrest
Europe is creating quite a stir for many large companies. Amazon.com, Inc. (NASDAQ:AMZN), Starbucks Corporation (NASDAQ:SBUX), and Google Inc (NASDAQ:GOOG) are being thrust into the European Union’s investigation on tax evasion. Every night BBC relays the latest EU attempt to collect more taxes from the listed companies. Tax rates for these companies, as shown below, are much lower than some may expect.
But like Amazon.com, Inc. (NASDAQ:AMZN), investors need not be weary of buying Google Inc (NASDAQ:GOOG). Google continues to build its business amidst this turmoil. Google invested $291 million into acquisitions already in 2013, posted staggering first quarter earnings, and is even looking to develop wireless networks in several emerging markets. Google wins. It is really that simple, and is a great add to any portfolio looking for stability and growth.
Weakness #2: Strikes abroad
Amazon.com, Inc. (NASDAQ:AMZN) is currently enduring a streak of strikes in Germany, its largest European base. While Amazon officials are downplaying the strikes and insisting its wage policies are fair it is important to recall Wal-Mart Stores, Inc. (NYSE:WMT)’s former troubles abroad.
In the 2000s Wal-Mart Stores, Inc. (NYSE:WMT) ran into problems with its German employees, as its American employee management practices didn’t fit the culture. The problem was exacerbated so badly that it was a major driver for Wal-Mart’s 26% profit plunge in the second quarter of 2006. The German Government didn’t help.
The same German government pressured Amazon.com, Inc. (NASDAQ:AMZN) to stop attempting to impose American labor laws of required hours on German employees, a move that eventually pushed Wal-Mart Stores, Inc. (NYSE:WMT) to sell its German stores and leave the country altogether. Wal-Mart pulled out of Germany in late 2006, suffering a $863 million loss from the debacle. Thankfully for Wal-Mart investors it quickly rebounded with Chinese expansion creating $7.5 billion in yearly revenue. A move that saved Wal-Mart’s stock price from its 2006 lows, as illustrated below. Wal-Mart today is learning from its past mistakes and providing great value for investors. With steady quarterly incomes and a solid 2% dividend, Walmart is a great company to add to the portfolio as markets begin to look exhausted at the latest run ups.
The situation looks bleak for Amazon.com, Inc. (NASDAQ:AMZN). If the strikes, which currently include about 1,300 of Amazon’s workers, continue investors will question Amazon’s long term prospects in the country.
Any stock price pullback from the unrest in Germany does one thing – make the price more attractive for investors to buy. While Wal-Mart Stores, Inc. (NYSE:WMT) exited the country after their problems in Germany, market share is too important to Amazon.com, Inc. (NASDAQ:AMZN) in Germany. Amazon will be more than willing to eventually settle with its labor force before losing its largest distributor location in Europe.
Why the good outweighs the bad
Amazon.com, Inc. (NASDAQ:AMZN) is a giant, with its hands growing in every which way. Its sales topped $61 billion a year, and Amazon is turning in gross profits that have nearly doubled every year for the last three years. All while showing no signs of a slowdown.
Recently Amazon.com, Inc. (NASDAQ:AMZN) was awarded a government cloud computing system contract worth $600 million just earlier this year over intelligence leader IBM. As seen in the chart below, IT cloud computing spending increased from $16.2 billion in 2008 to $42.3 billion in 2012. Amazon is positioning itself in a flourishing business segment, not a dying one, but attempting to gain market share in a future predicted to include $131 billion in government cloud computing contracts. Amazon, by diversifying its business into new areas such as the government cloud computing contracts is bringing in new profit opportunities for investors.
No need to sell
Amazon.com, Inc. (NASDAQ:AMZN) has conquered the online industry, and with or without Germany will continue to do so. The smart money is on Amazon quickly moving past these disputes and continuing to focus on growth and development. Investors should merely look at any pullbacks in Amazon’s share price, as the perfect opportunity to buy. Any tax increases in Europe, or strikes in Germany will only provide more publicity for the internet giant as Amazon sees opportunity rather than distress.
This article was written by Ian Finney and edited by Chris Marasco. Chris Marasco is Head Editor of ADifferentAngle. Neither has a position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com and Google.
The article Strikes Abroad Offer Buying Opportunity Back Home for This Company originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
