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Analyst: Amazon should buy 1,000 gas stations

Aarthi Swaminathan
Finance Writer

DA Davidson’s Tom Forte believes that the future for Amazon ($AMZN) — besides dominating the cloud computing and e-commerce while disrupting other industries — involves filling up your gas tank.

“If Amazon really wanted to make a splash, they could add 1,000-plus gas stations,” Forte said on Yahoo Finance’s Midday Movers. “It could be a sales lift for Amazon.”

Forte, the most bullish analyst on Amazon with a $2,450 price target, predicts that Amazon gas stations would increase the company’s physical presence while also lowering the cost of delivery and boosting revenue with sales from gas.

“Having 1,000-plus locations where they’re delivering to a commercial address rather than residential, that could be a huge cost-savings for Amazon,” he said. In other words, the Amazon gas stations would allow the company to place Amazon Lockers all over instead of doing door-to-door deliveries.

A bright yellow Amazon storage locker is pictured outside the 7-Eleven on Morrissey Blvd. in Boston. The high-tech lockers claim to prevent the theft of deliveries from your doorstep by package pirates. Are Amazon gas stations next? (Photo: David L. Ryan/The Boston Globe via Getty Images)

Amazon gas stations as a play on CostCo

Forte also suggested that Amazon follow Costco (COST), which derives a tenth of its sales from gas. Amazon gas stations could also serve as a vehicle to offer Prime membership discounts, which could possibly increase sign-ups and retention.

While analysts previously believed that Costco itself was “Amazon-proof,” cracks have already begun to appear with Amazon surpassing Costco in terms of membership numbers. Amazon gas stations would be another way for Amazon to go after Costco members.

Amazon heading towards becoming yet another big-box retailer — perhaps Costco 2.0 — isn’t necessarily a bad thing, Forte added. Looking at the elements involved in a convenience store, Forte said that Amazon Go’s cashierless technology could be a natural fit.

And all that effort could also pay off in the form of customer intelligence. Forte suggested that data from all the new proposed gas stations could “provide the company additional data on the physical whereabouts of consumers,” helping the company map out shopping habits.

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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