Published: Fri, January 12, 2018
Finance | By Loren Pratt

Analyst predicts Amazon will purchase Target in 2018

Analyst predicts Amazon will purchase Target in 2018

The prominent technology analyst and founder of Loup Ventures, Gene Munster, announced his eight predictions for 2018 and causing a stir in the retail industry is what he himself describes as his boldest prediction: Amazon will buy Target this year. Now the combination as I said is easy to understand, the timing is always hard but we think now is the time for Amazon to strike them by Target.

The provocative prediction that Amazon would buy Target was made by Loup Ventures' Gene Munster, a prescient tech stock analyst whose tips can, and in this case did, move markets. Munster believes Amazon is eying up U.S. retail giant Target, and will acquire the company later this year. "Are the Target customers more frequent shoppers with larger carts than the same shoppers when they shop with Amazon?".

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. Amazon could gain access to a strong brand, a network of upscale stores and also an immediate expansion of its distribution network, which could lead to a rapid expansion of the AmazonFresh delivery service. "What they're doing with Whole Foods is a big tip of the hand" indicating that Amazon sees its future as a mix of mostly online and some offline. 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. In November, DA Davidson analyst Tom Forte wrote that Lululemon Athletica Inc. may be attractive to the online retailer, while Citigroup analyst Paul Lejuez recently catalogued a host of potential targets, including Abercrombie & Fitch Co., Bed Bath & Beyond Inc. and Advance Auto Parts Inc. If you put those three together Amazon, Target, Whole Foods, essentially what it's setting up is the high end retailer dominant.

It's shaping up to be a critical year for Target Corporation (NYSE:TGT), as rumors continue to swirl about a possible buyout from (AMZN) later in 2018. "As much as Target would bolster Amazon's top line, Amazon can grow organically without resorting to expensive acquisitions".

One shopper liked the idea of Amazon taking on Walmart. "Data is arguably another play". There's about 470 that Whole Foods has. "Through its loyalty and card schemes, Target has a significant amount of data that Amazon can use and integrate into its systems".

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