After The Wall Street Journal reported that Wal-Mart (WMT) was in talks about buying e-commerce marketplace operator Jet.com, research firm Pacific Crest said it thinks that such a deal could create a "formidable competitor" for Amazon (AMZN) in the U.S. However, the analyst believes that Amazon would still be able to grow its U.S. business significantly if the deal does occur.
WAL-MART, JET COULD BE STRONG TEAM: Jet.com has grown very quickly, but it may have difficulty becoming profitable in the current, highly competitive U.S. e-commerce market, wrote Pacific Crest analyst Edward Yruma. However, the analyst believes that Wal-Mart's "best in class logistics and significant buying power," in tandem with Jet's strong growth, would make the combined company a "formidable competitor." Acquiring Jet could boost Wal-Mart's e-commerce growth significantly, Yruma added.
AMAZON GROWTH STILL SEEN: However, since e-commerce still accounts for only 10% of U.S. retail sales, both Amazon and Jet could grow as more sales move online, Yruma contended. Moreover, Amazon's use of "sticky" technology services, including Amazon Video and its Alexa digital assistant, are a "key differentiator" for the e-commerce giant, said the analyst, who kept an $847 price target and Overweight rating on Amazon.
PRICE ACTION: In late morning trading, Amazon rose about 1% to $761.26 and Wal-Mart was little changed near $73 per share.
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