Amazon Stock In Focus As Proposed Class Action Lawsuit Brings Scrutiny: Retail’s Bearish

Amazon stock closed 0.86% lower on Tuesday as the company faces a reported class action lawsuit alleging it violated federal law by using nearly $350 million in forfeited 401(k) funds, dampening retail sentiment.

The alleged violation centers on Amazon offsetting its own contributions instead of cutting administrative fees for more than 20,000 participants, Reuters reported. The suit cites instances of “self-dealing” and violating duties of loyalty and prudence under the federal Employee Retirement Income Security Act of 1974, which regulates employee benefit plans.

The lawsuit was filed in the Seattle federal court earlier in the week by Amazon employee Cory Curtis.

Participants in Amazon's 401(k) plan become fully vested after three years, entitling them to matching contributions from the company. According to the lawsuit, participants who did not fully vest forfeited about $349 million in matching funds between 2018 and 2023. Amazon reportedly did not use this money to cover the plan's administrative fees, totaling more than $18 million during the same period.

Retail sentiment on Stocktwits was ‘bearish’ compared to ‘bullish’ a day ago.

AMZN sentiment meter and message volumes on Jan 1 as of 10:15 pm ET

Recently, Tigress Financial analyst Ivan Feinseth raised Amazon’s price target to $290 from $245 and with a  Buy rating, the Fly.com reported. According to the analyst,  Amazon continues to benefit from strong retail trends, as well as growth in its AI integration.

Amazon also recently faced worker strikes at seven U.S. facilities including New York, Atlanta and San Francisco, according to media reports. The strike was led by the International Brotherhood of Teamsters union represents, which represented about 10,000 workers at 10 of the firm's facilities.

Amazon stock is up 44% year-to-date.

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