Amazon’s grocery expansion could pose challenge to peers, says Morgan Stanley

Amazon (AMZN) is expanding its grocery selection to Amazon.com and is effectively lowering the cost of delivery and minimum basket size in latest efforts to drive more of the $1.5T offline grocery opportunity, Morgan Stanley tells investors in a research note. The firm, which has an Overweight rating and $300 price target on Amazon shares, believes Amazon has been losing “modest” online grocery share to Walmart (WMT), DoorDash (DASH), and Uber (UBER) due to to price, selection, convenience, delivery, and pick-up options, and thinks this category expansion and effective price reduction is an important signal of increased investment to drive durably faster growth. The grocery opportunity is large, but the extent to which Amazon increases competition could eventually challenge growth or profitability of peers, the firm argues, noting that among all grocers, Walmart has the most demonstrable track record of share gains and that it has been preparing for this risk over the last decade.