Friday, 20 April, 2018

Amazon will buy Target in 2018, influential tech analyst Gene Munster predicts

Bitcoin Bites Amazon Acquires Gene Munster's 8 Tech Predictions For 2018 Amazon will buy Target in 2018, influential tech analyst Gene Munster predicts
Nellie Chapman | 12 January, 2018, 18:45

The analyst is predicting that online shopping giant Amazon.com will make a bid for United States department store Target this year to bolster its retail offering following Amazon's US$13.7 billion acquisition of upmarket grocer Whole Foods in the U.S., according to a report today in Bloomberg. "I know that monopolies are never something that you want, but I think Amazon has done a pretty good job of keeping prices competitive", said Michelle Wilson, of Ross. One analyst is predicting that Amazon is going to buy Target this year.

Target stock traded up more than 2% early Tuesday, at $66.79 in a 52-week range of $48.56 to $74.24.

With Target trading at about 0.5x sales while Amazon trades at over 3x sales estimates for 2018, it seems highly unlikely for Target shareholders to accept an all-stock deal. It has the advantage in the online space and innovative initiatives, but Walmart has begun making startup acquisitions and exploring cashier-free stores just like Amazon. Stripping out Whole Foods (roughly $11 billion in sales not included in 2017 numbers) that was added into the Amazon fold at the end of August, the organic growth rate dips below 15% in 2018 due to taking on the slow growth of the large Target retail base.

"Amazon believe's the future of retail is a mix of mostly online and some offline", Munster said. The commander-in-chief would certainly be vocal in his opposition to any deal Amazon might want to make, but whether that would be enough to kill a deal is arguable. "What they care about is gaining wallet share", he noted.

The purchase of Target would be a natural fit, Munster wrote.

More than advancing Amazon's retail business, Saunders sees Target's logistics and supply chain as a greater value. The company's acquisition of Whole Foods cost $13.7 billion. Even after acquiring Whole Foods and its own Amazon Go stores, its footprint is about 470 stores.

One possible hurdle is President Trump's undisguised dislike of Amazon founder and CEO Jeff Bezos, who also owns The Washington Post, a revitalized nemesis for the president. "As much as Target would bolster Amazon's top line, Amazon can grow organically without resorting to expensive acquisitions". "Data is arguably another play". Whole Foods gets it some brick and mortar infrastructure and entrance to the grocery business.

An ideal takeover target for Amazon is a retailer with strong physical retail but not necessarily strong e-commerce, Fosina also said.

"Amazon has to chew and swallow before it can really take another bite of anything else", she said.