Certainly, Target's stock has swooned over the past year, and sources suggest it may need to do something transformative to address its challenges. It is the "lost child" of retailers, with no clear core competency (though a strong home and apparel business). It is unclear that a sale to Amazon though is in its future.
As a starting point, it is important to keep in mind that Amazon is prudent in its acquisitions and does not do many large-scale ones. Acquiring Target would be its largest deal yet. When Amazon does a big deal, it is looking for explicit capacities it lacks in areas it has already found challenging.
When Amazon bought Whole Foods, it had been studying, investing and struggling to manage the business of fresh food for a long time prior. Whole Foods gave Amazon a strong brand name in the fresh food industry, expertise in managing foods and distribution centers for that food.
It similarly can be said for Amazon's $847 million acquisition of Zappos, which followed Amazon's unsuccessful dalliance with selling shoes and accessories through Endless.com. At the time of the Zappos deal, Endless was receiving 777,000 visitors a month according to Comscore, while Zappos got 4.5 million visitors, the New York Times then reported.
The question Amazon therefore faces in evaluating a Target deal are: 1) How much does Target offer that Amazon can't already do on its own; 2) Does Amazon need whatever Target does offer so badly that it justifies a purchase of a company with a market capitalization of $36 billion.
Here are the considerations: