Amazon’s biggest bull says it should disrupt gas stations

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

That view comes courtesy of DA Davidson, which wrote that the company could benefit from expanding its portfolio of physical stores — which already includes “popup” stores 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 to utilize Amazon Go, its cashier-free checkout technology. In addition, selling gas would provide another revenue source; Forte noted that Costco Wholesale derived 10 per cent of its revenue from gasoline sales.

DA Davidson has a buy rating on the stock, along with a US$2,450 price target, the highest of any on the Street, according to data compiled by Bloomberg. The average is $2,155, which implies upside of more than 40 per cent from current levels.

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.

Amazon derived 7.5 per cent of its third-quarter revenue from physical stores, data compiled by Bloomberg show. More than 50 per cent came from online stores.