Amazon just announced its biggest deal yet, and Wall Street loves it.
The e-commerce giant announced a deal to acquire Whole Foods Market for $13.7 billion cash or $42 a share Friday morning.
Amazon shares traded up 3 percent shortly after the market open, while grocery and retailer stocks plunged on the news. Kroger declined 14 percent, Wal-Mart fell 5 percent, Costco fell 6 percent and Target traded down 10 percent respectively.
The purchase “gives Amazon a launching pad not just for food but possibly drugs as well where customers aren’t willing to wait even a day. Some won’t survive,” Belpointe chief strategist David Nelson wrote in an email.
Even a famous short seller is applauding the acquisition.
“It means that Amazon understands the need for omni-channel retailing and they are dedicated to be all things to all people. There are still some goods that need physical stores and food is one of them,” Citron Research’s Andrew Left wrote in an email. “When Amazon enters a market, they do it thoughtfully with focus on the customer. … Amazon just rocks. Nothing else to be said.”
To be sure, there were some skeptics.
“Amazon is an internet company, not a low-margin bricks & mortar grocery company,” said Fred Hickey, editor of High Tech Strategist. “It’s a concern that Amazon could get bogged down with Whole Foods, a struggling chain of 450 grocery stores. AmazonFresh was supposed to be their vehicle to move into that business. In their never-ending search for growth, Amazon seems to be moving further & further afield from their core competency.”
Some on Wall Street predicted this big entry into the food business.
Instinet analyst Anthony DiClemente presciently wrote a report Thursday that Amazon would disrupt grocery business next and that justifies its surging price.
The grocery industry remains one of the “largest and most under-penetrated markets” for the company, he wrote in the note to clients.
With grocery and retailer shares plunging after the deal news it looks like market believes Amazon’s disruptive ability now, too.