Will Amazon target Target in 2018?
Amazon will buy Target this year, according to Gene Munster, tech analyst and co-founder of investment firm Loup Ventures.
“Amazon believes the future of retail is a mix of mostly online and some offline. Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count,” Munster writes in a blog post. “As for the demographic, Target’s focus on moms is central to Amazon’s approach to win wallet share. Amazon has, over the years, aggressively pursued moms through promotions around Prime along with loading Prime Video with kid-friendly content. As for retail stores, its acquisition of Whole Foods 470 stores along with testing of the Amazon Go retail concept is evidence that it sees the future of retail as a combination of mostly online and some offline. Despite gaining Whole Foods, its approximately 470 store presence still dwarves Walmart at 11,695 (global). If Amazon acquires Target that would jump its store count to about 2,300.”
In terms of anti-trust, the Trump administration won’t do any favours for Amazon boss, Jeff Bezos, but the market share numbers suggest the deal will be approved. “Looking at the top 18 US retailers (including grocery), Walmart has about 23% share and an Amazon/Target combination would have about 13% share. Lastly, Amazon can afford Target. If you assume they pay a 15% premium to the current TGT trading level would imply a take-out valuation of $41 billion, about 8% of the value of Amazon’s current $564 billion market cap,” says Munster.
So, is this a sensible or outlandish prediction? The latter, if you ask Brendan Witcher, Principal Analyst, Forrester - Digital Business Strategy. In a LinkedIn post, he commented: “I love how an investment firm, that probably has an interest in Target, says Amazon will buy Target, and all these "industry experts" jump on the idea like a cat chasing a laser pointer. From their website: Disclaimer: From time to time, we will write about companies that are in our portfolio. #headsmack”