MORGAN STANLEY: Amazon could 'close the gap' between Whole Foods and its competitors' cheaper prices
(AP Photo/Joseph Pisani
Amazon began slashing prices almost immediately, lowering the cost of various items from salmon and ground beef to avocados and organic kale.
Morgan Stanley analyst Brian Nowak sees lower prices as a way for Whole Foods to attract new customers, increase sales, and ultimately raise Amazon's stock to even higher levels than the 26% climb so far this year.
"We believe there is room for pricing-driven share gains given our latest AlphaWise survey shows that 70% of people who don't shop at WFM list price as the main barrier," Nowak wrote in a note to Morgan Stanley clients on the eve of the merger.
"Our Grocery team's survey work shows that WFM's average prices are ~14% higher than the average grocery store. We see lower pricing leading to accelerating WFM share gains.
Here's how Whole Foods prices compare to national averages, as well as to competitors Kroger and Sprouts Farmers Market:
Lower prices could entice shoppers who had previously avoided Whole Foods, says Morgan Stanley."In essence, we believe WFM prices are 5% higher than competitors (excluding Proteins) and think AMZN has the ability to close that gap," writes the bank.
Cheaper options top the list of reasons shoppers avoid the chain, followed by convenience and better selection elsewhere. Here's a full breakdown:
The bank also sees delivery and online ordering as another way for Amazon to harness Whole Foods as a driver of growth.
"Just as AMZN pushed expectations from a week delivery time (13 years ago) to 2 days (with Prime, introduced in 2005), a more robust Prime Now could further move the goal-posts to 2 hours. This will only further AMZN's competitive offering vs other retailers," writes the bank.
After the merger, Morgan Stanley maintains its overweight rating on Amazon's stock. The bank's price target of $1,150 is roughly 21% above where Amazon shares were trading mid-morning in New York.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- Colon cancer rates are rising in young people. If you have two symptoms you should get a colonoscopy, a GI oncologist says.
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- Catan adds climate change to the latest edition of the world-famous board game
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- JNK India IPO allotment – How to check allotment, GMP, listing date and more
- Indian Army unveils selfie point at Hombotingla Pass ahead of 25th anniversary of Kargil Vijay Diwas
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market