Amazon's next acquisition target might be Target, according to one expert

Analyst predicts Amazon to acquire Target later this year

Munster: Amazon.com, Inc. (AMZN) Will Acquire Target In 2018

Munster believes Amazon is eying up United States retail giant Target, and will acquire the company later this year.

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Probably included on that list is Loup Ventures' Gene Munster, an analyst who predicts Amazon will buy Minneapolis-based Target this year.

As an example of how the partnership between Amazon and Target could work, Munster pointed to the ecommerce giant's purchase of Whole Foods to show how the combination of online and offline operations can be utilized.

"Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count", Munster and his team wrote in a Tuesday note.

Loup Ventures admits that the timing of such a deal is hard to pin down, but "seeing the value in the combination is easy".

Target bought Shipt for $550 million and while it's unlikely Target can out-Amazon Amazon, a company doesn't throw a half-billion dollars away if it considers selling out to Amazon a possibility within the next 12 months. The typical takeover premium averages between 20% and 30%, although the analyst thinks Amazon could get away with paying a 15% premium instead as traditional retailers are on the nose. Year-to-date, AMZN has declined 0.00%, versus a 0.31% rise in the benchmark S&P 500 index during the same period. The Amazon-Whole Foods combination could help simplify Target's re-modeling strategy, as there is a considerable overlap of customers between Amazon Prime subscribers and Target.

Amazon has long ceased to be an online-only company.

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Munster said Amazon has "aggressively pursued" the family market with promotions for kid-friendly video content.

Target in the USA serves a very similar market to its Australian namesake, although the two companies have no commercial connection.

The union would also enable Amazon to leverage Target's 1,834 stores in its battle to take on Walmart, which has been using its more than 4,700 USA stores to lure customers with special in-store discounts and other perks.

But it's not at all clear that Amazon and Target agree.

It could be a win for Target, too, and it could arm Target and Amazon against a surging Walmart.

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

In an all-cash deal, Amazon could end up with net debt surpassing $50 billion.

Another analyst - Ken Leon from CFRA - expects the company to advance in the world of financial services in 2018, by purchasing a small-to-mid sized bank in 2018.

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