Amazon should disrupt gas stations, stock analyst suggests

Amazon.com Inc. is a dominant player in industries as diverse as cloud computing, streaming media and e-commerce, but the next area it should set its sights on is more old-fashioned: gas stations.

That view comes courtesy of investment banking firm DA Davidson, which wrote that Amazon could benefit from expanding its portfolio of physical stores — which already includes pop-up shops and the Whole Foods grocery chain — as “another means for it to advance its delivery efforts.”

This comes after the Wall Street Journal reported Monday that Amazon was planning to expand the number of Whole Foods stores.

Adding gas stations would “provide the company thousands of commercial locations to advance its delivery efforts,” analyst Tom Forte wrote to clients. He suggested that such outposts could be used for Amazon Locker, the company’s centralized package-pickup locations, or Amazon Go, its cashierless checkout technology. In addition, selling gas would provide another revenue source; Forte noted that Costco Wholesale Corp. derived 10% of its revenue from gasoline sales.

DA Davidson has a “buy” rating on the stock, along with a $2,450 price target, the highest of any on Wall Street, according to data compiled by Bloomberg. The average price target is $2,155, which implies upside of 40% from current levels. (The stock rose 2.5% on Wednesday to $1,539.13 a share.)

Gas stations would also “provide the company additional data on the physical whereabouts of consumers,” as it would have “thousands more locations where it would know where consumers were shopping,” Forte wrote in a Wednesday note to clients.

Amazon derived 7.5% of its third-quarter revenue from physical stores, data compiled by Bloomberg show. More than half its third-quarter revenue came from online stores.

Amazon’s stock encountered bouts of heavy volatility in the second half of 2018. The shares dropped more than 30% of their value between a September record high and a Dec. 24 bottom, though it ended the year with a solid gain, up 28%.

Vlastelica writes for Bloomberg.