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Is Target (TGT) Next on Amazon's (AMZN) Acquisition List?

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Target CorporationTGT may be next on Amazon's AMZN buyout list. This is what Loup Venture co-founder Gene Munster predicts, per media reports. The forecast made by the famous tech analyst is enough to shake the retail industry, which has certainly been facing the brunt of heightened online competition, lower footfall and changing consumer spending patterns.

Munster highlighted that given "shared demographic and manageable but comprehensive store count" Target remains a perfect choice for Amazon. Munster added that if the acquisition takes place, Amazon may have to shell out $41 billion, which reflects a premium of approximately 15% to Target's current value. Shares of Target were up 3.7% during the trading session yesterday.

If the prediction comes true, this would be Amazon's second major buyout after Whole Foods, in its quest to become a dominant player in the retail industry. With the acquisition Amazon's store count would jump to roughly 2,300, including Whole Foods' approximately 470 stores but will still be lower than Wal-Mart's WMT mammoth count of more than 11,600 stores. Industry experts believe that the amalgamation between online marketplace and physical stores could bring a massive change in the retail industry going forward.

In fact, retail is no more restricted to brick-&-mortar. The scenario has drastically changed with the advancement of technology and digital transformation that are playing key roles. Consumers now prefer to shop online from the comfort of their homes rather than hopping from one store to another. Nevertheless, this transition has persuaded retailers to come up with innovative ways to market products, and Target is no exception to the trend.

Well only time will tell, whether Amazon acquires Target. But for now the latter has undertaken strategic endeavors to fast adapt to the ultra-competitive retail environment.

How is Target Adapting to the Changing Retail Picture?

No wonder Target is trying all means to rapidly adapt to the changes in the retail ecosystem. We believe that initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores, bode well. The company intends to deploy resources to significantly develop online platform as well as store facilities to make shopping more convenient for customers. We observed that comparable digital channel sales surged 24% during the third quarter of fiscal 2017 and added 0.8 percentage points to comparable sales.

This general merchandise retailer recently launched curbside pickup program, at 50 Twin Cities stores. This program gives customers an option to get ordered items without leaving the comfort of their cars. It has also rolled out Target Restock program that allows customers to restock shipping box with essential items online and get them delivered at door steps by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company had acquired Grand Junction.

To tap digital sales this holiday season, Target strengthened relationship with Google by allowing customers nationwide to shop through Google Express, including voice-activated shopping. Wal-Mart and Home Depot HD are also using Google's voice-activated shopping platform. Target has also made a concerted effort on the front of same-day delivery services by acquiring internet-based grocery delivery service Shipt for $550 million.

Certainly, Target is leaving no stone unturned to attract consumers and attain incremental revenues. We believe that these strategies are likely to bolster the company's performance and drive the stock further. Shares of this Zacks Rank #3 (Hold) have increased 15.3% in the past three months, outperforming the industry 's growth of 14%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Home Depot, Inc. (The) (HD): Free Stock Analysis Report

Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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