JEFFERIES: Whole Foods could 'put a dent' in Amazon's profits
Investors, though, didn't seem to think much of it: the stock is basically unchanged this week at around $961.
Even over the long-term, Amazon's stock price hasn't really celebrated this deal. Shares opened 0.6% lower on Wednesday than they closed the day before the deal was announced in mid-June.
Jefferies analysts - who maintain one of the highest price targets for Amazon stock - $1200 versus a Wall Street consensus of $1150, say the purchase will put a dent in Amazon's earnings. That is partly to reflect that Amazon immediately went about cutting prices of staples at Whole Foods.
"We are lowering our FY17/18 EPS estimates to $2.48/$7.38 (from $3.68/$10.30) but raising total rev to $177Bn/$228Bn (from $171Bn/$213Bn) as a result of layering the Whole Foods (WF) model onto our prior AMZN estimates," the bank said in a note Tuesday. "While WF is only growing single digits, and also puts a dent into near-term profitability, we think this acquisition presents a series of attractive call options for other parts of the AMZN business."
To be sure, Jefferies is still very bullish on Amazon, whose stock is up 25% over the past year. But analysts Brent Thill, Brian Fitzgerald, and Michael Turrin warn that "macroeconomic headwinds could slow top-line growth and margin expansion."
It all comes down to what color management can give on the earnings call next month.
