Wall Street really loves Amazon's $13.7 billion deal to buy Whole Foods

Key Points
  • "Amazon just rocks. Nothing else to be said," Citron Research's Andrew Left says.
  • But High Tech Strategist's Fred Hickey says: "Amazon seems to be moving further & further afield from their core competency."
Whole Foods deal is another step in the evolution of Amazon: UBS

Amazon just announced its biggest deal yet, and Wall Street loves it.

The e-commerce giant announced a deal to acquire Whole Foods Market for $13.7 billion cash or $42 a share Friday morning.

Amazon shares traded up 2.4 percent Friday, while grocery and retailer stocks plunged on the news. Kroger declined 9.2 percent, Wal-Mart fell 4.7 percent, Costco fell 7.2 percent and Target traded down 5.1 percent respectively.

The purchase "gives Amazon a launching pad not just for food but possibly drugs as well where customers aren't willing to wait even a day. Some won't survive," Belpointe chief strategist David Nelson wrote in an email.

Even a famous short seller is applauding the acquisition.

"It means that Amazon understands the need for omni-channel retailing and they are dedicated to be all things to all people. There are still some goods that need physical stores and food is one of them," Citron Research's Andrew Left wrote in an email. "When Amazon enters a market, they do it thoughtfully with focus on the customer. … Amazon just rocks. Nothing else to be said."

JPMorgan analyst Doug Anmuth says Amazon will innovate the customer buying experience in Whole Foods Market stores.

"We believe AMZN can work to transform the physical retail experience. We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle," he wrote in a note to clients. "The checkout-free experience in Go is not yet ready for prime-time as it is still only being beta-tested by AMZN employees, but we believe the Go technology could be rolled out to physical retail, including Whole Foods, over time."

To be sure, there were some skeptics.

"Amazon is an internet company, not a low-margin bricks & mortar grocery company," said Fred Hickey, editor of High Tech Strategist. "It's a concern that Amazon could get bogged down with Whole Foods, a struggling chain of 450 grocery stores. AmazonFresh was supposed to be their vehicle to move into that business. In their never-ending search for growth, Amazon seems to be moving further & further afield from their core competency."

Some on Wall Street predicted this big entry into the food business.

Instinet analyst Anthony DiClemente presciently wrote a report Thursday that Amazon would disrupt grocery business next and that justifies its surging price.

The grocery industry remains one of the "largest and most under-penetrated markets" for the company, he wrote in the note to clients.

With grocery and retailer shares plunging after the deal news it looks like market believes Amazon's disruptive ability now, too.