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How Would Jet.com Fit Into Wal-Mart's Operations?

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How Would Jet.com Fit Into Wal-Mart's Operations?

Wal-Mart Stores, Inc. (NYSE: WMT) is reportedly in discussions with Jet.com to buy it. While the former is the world's biggest retailer, the latter online firm is a start-up that has attracted a lot of attention. Therefore, how would it help the biggest retailer's operations as both companies stand in different directions?

Wal-Mart is facing tremendous pressure from online retailer, Amazon.com, Inc. (NASDAQ: AMZN), as it is generating only 3 percent of its overall revenue from its online sales segment. With smart devices enjoying accelerated growth in the usage, the retailer cannot afford to miss the e-commerce bus.

Jet.com could fit the bill. Wal-Mart wants an aggressive partner to help it give Amazon a run for its money. The retailer has been spreading its Wal-Mart Pay system and an acquisition could add strength.

As far as Jet is concerned, an acquisition by a huge company such as Wal-Mart would help since it needs billions of dollars to take on the mighty Amazon. The company has also given enough worries by offering big discounts to the customers to undercut the importance of buying through Amazon.

Related Link: Wal-Mart's Q2 Could Be A Repeat Of Q1

However, if it wants to survive or create a tough competitive environment against Amazon, it needs Wal-Mart's help, since the biggest retailer also offers deep discounts. Jet.com founder, Marc Lore, was already credited for the success of Diaper-parent Quidsi Inc. However, that was later sold to Amazon for a solid amount of $550 million in 2010.

Jet.com, which is only a year old, also got the backing of investors as it could get over $500 million from venture companies like Accel Partners, Goldman Sachs Group or Fidelity Investments. The important factor here is that it could attract investors, despite projecting losses, since it would initially spend more on marketing to draw customers.

As far as Wal-Mart investors are concerned, any deal could lift investor sentiments. The stock is trading above the 50-day and 200-day moving averages by 0.94 percent and 11.38 percent, respectively. The consensus price target of $69.07 is lower than the current market price of $72.73, down $0.42 (0.57 percent).

Shares of Amazon also traded down by $7.04 (0.93 percent) at $753.54 on Wednesday.

Latest Ratings for WMT

DateFirmActionFromTo
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Raymond JamesMaintainsOutperform

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Posted-In: Jet.com Marc LoreAnalyst Color M&A News Rumors Analyst Ratings General

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StockFirmActionPT
PBTruist SecuritiesMaintains88.0
CFRTruist SecuritiesMaintains111.0
FANGTruist SecuritiesMaintains105.0
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SBNYCredit SuisseMaintains250.0
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