Rebecca Ungarino

On the first day of 2018, widely followed analyst Gene Munster of the venture capital firm Loup Ventures <a href="https://www.businessinsider.com/amazon-could-buy-target-to-crush-walmart-2018-1/?utm_source=intl&amp;utm_medium=ingest" id="952c57da-e4a7-3860-a6be-9b413bf93bc4"> predicted Amazon would buy Target this year </a> , a forecast that has yet to pan out with 22 days left.

The firm just doubled down on that prediction, however, writing in a new note that the deal still makes sense.

"Our prediction that Amazon would acquire Target in 2018 was wrong," Andrew Murphy, managing partner at Loup Ventures, wrote at the end of a post published late Thursday looking at Amazon and <a href="https://markets.businessinsider.com/stocks/wmt-stock?utm_source=intl&amp;utm_medium=ingest" id="a0069cd9-4207-3fce-a042-cc80c3cea13f"> Walmart </a> .

"We continue to believe the combination makes sense, however, because Amazon needs to acquire Target-like footprints (1,800 stores) in order to continue its growing retail presence."

Though the timing of the deal is difficult to pinpoint, it would appear an acquisition could get done between now and 2021, Munster told Business Insider in an interview on Friday.

Such a deal would pose a threat to Walmart, which has more than 5,000 stores in the US (the vast majority of which are Walmart Supercenters). Munster said Amazon acquiring Target would "accelerate an existing threat" to Walmart.

A Target acquisition would allow Amazon to compete more effectively in product design and merchandising, areas Murphy believes it lacks. It would bolster Amazon's foray into brick-and-mortar, he said, with in-store elements like curation and experience. Amazon <a href="https://www.businessinsider.com/amazon-buying-acquiring-whole-foods-for-42-a-share-2017-6?utm_source=intl&amp;utm_medium=ingest" id="b6aeab51-4ce2-331e-ad15-798e3b9aff44"> acquired Whole Foods for $13.7 billion </a> in 2017.

"Amazon isn’t great at product design (cf. Amazon Fire Phone, and even amazon.com or the Echo lineup), and retail stores are products," he wrote, pointing to an unsavory review of Amazon's four-star store in The New York Times.

The firm has <a href="https://loupventures.com/returning-to-our-amazon-target-prediction/" id="fca4c092-e086-378d-ab5f-4ccd7f8a7ddc"> reiterated its stance on the deal's possibility before </a> ; Munster said in late June that he was sticking with his prediction.

"Getting the timing correct is difficult, and every business day that passes it becomes 0.38% less likely that our prediction comes to fruition," he wrote. "That said, we remain adamant that this combination makes sense."

Specifically, he noted that the two retail powerhouses are pursuing similar demographics, and he believes Amazon still needs to capture physical retail space. The company, based in Seattle, is considering opening as many as 3,000 cashierless stores across the country by 2021, <a href="https://www.businessinsider.com/report-amazon-wants-3000-amazon-go-stores-by-2021-2018-9?utm_source=intl&amp;utm_medium=ingest" id="b548de0c-855b-32d5-ac5b-29a31953eaf9"> Bloomberg reported in September </a> .

Still, Munster said such a push would be "microscopic compared to what they need to do to be a global leader in commerce more broadly."

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Shoppers check out with 'Black Friday' deals at a Target in Utah in 2016.

Amazon buying Target would 'accelerate an existing threat' to Walmart, says analyst who's doubling down on his call (AMZN, TGT, WMT)

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It's clear in the retail space that companies either have to adapt to <a id="426bfef3-f39e-3c69-a747-b3e73578854c" href="https://www.businessinsider.com/nothing-can-stop-the-shift-to-online-shopping-2017-11?utm_source=intl&amp;utm_medium=ingest"> consumers' shifting tastes, </a> or <a id="19c7e057-e827-3345-a256-2693f6e7f4bb" href="https://www.businessinsider.com/retail-bankruptcies-list-this-year-2018-4?utm_source=intl&amp;utm_medium=ingest"> suffer </a> .

Loup Ventures, a venture capital firm with a focus on technology companies, just called for what could turn out to be an even starker development featuring two dominant faces of the changing landscape — Amazon and Walmart.

"Amazon is growing its physical retail business to better compete with Walmart; Walmart is growing its online retail business to better compete with Amazon. We believe a retail duopoly is emerging," Andrew Murphy, managing partner at the venture capital firm, said in a <a id="475d8508-2fcf-391b-ac5d-4ed25a89f176" href="https://loupventures.com/amazon-and-walmart-are-taking-aim-at-each-other/"> post </a> late Thursday.

Murphy looked at the two companies' aggressive expansions away from their own core businessesover the last two or so years, starting with when Walmart <a id="eb7d40de-5e0a-349a-a8ea-49135b224d28" href="https://www.businessinsider.com/jet-walmart-weapon-vs-amazon-2017-9?utm_source=intl&amp;utm_medium=ingest"> acquired </a> Jet.com in 2016.

On Thursday, Walmart announced <a id="6833e75c-b99c-3bf3-a094-3aafa52b7912" href="https://www.businessinsider.com/walmart-acquiring-art-dot-com-2018-12?utm_source=intl&amp;utm_medium=ingest"> another acquisition </a> in the digital commerce space, buying Art.com, which it described as the world's largest online retailer "in the art and wall décor category," for an undisclosed price. Some of Walmart's notable digital deals since 2016 have included Modcloth, Bonobos, Flipkart, and Bare Necessities.

Meanwhile, Amazon has ratcheted up its physical retail presence <a id="1fd9ff1c-c32d-3053-a07b-a8d47c64a965" href="https://www.businessinsider.com/amazon-buying-acquiring-whole-foods-for-42-a-share-2017-6?utm_source=intl&amp;utm_medium=ingest"> since acquiring Whole Foods in 2017 </a> .

It opened three Amazon Go stores in Seattle between January and September of this year, and opened its first four-star store in New York in late September. The Seattle-based giant also said in September it would <a id="cb7b0aab-d99a-3f4b-a7dd-315c4cb2656c" href="https://www.reuters.com/article/us-more-m-a-amazon-com/amazon-buys-stake-in-owner-of-indian-supermarket-chain-more-idUSKCN1M02JA"> acquire a stake </a> in Indian supermarket chain More.

Murphy said his firm's prediction earlier this year that Amazon would acquire <a id="9eedda14-5f4e-3bfe-aa42-2d90516c7a7f" href="https://markets.businessinsider.com/stocks/tgt-stock?utm_source=intl&amp;utm_medium=ingest"> Target </a> in 2018 was wrong, at least with about three weeks left in the year.

"We continue to believe the combination makes sense, however, because Amazon needs to acquire Target-like footprints (1,800 stores) in order to continue its growing retail presence," he said.

The market has rewarded Amazon this year, with its shares up 43%, while it's punished Walmart, shares of which have fallen 4% in the same time. Walmart is well off its 52-week lows, however, while Amazon has sunk from its recent all-time high.

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A US Postal worker delivers Amazon boxes outside of the New York Stock Exchange in October.

Amazon and Walmart are set to become a 'retail duopoly' (WMT, AMZN)

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Amazon and Walmart are set to become a ‘retail duopoly,’ Loup Ventures says (WMT, AMZN)

Some investors see the <a id="a3d0417b-d80b-3e8a-aede-e928fd2d0960" href="https://www.businessinsider.com/yield-curve-inversion-us-recession-signal-bond-market-red-flag-2018-12?r=UK&amp;IR=T?utm_source=intl&amp;utm_medium=ingest"> recent inversion of part of the yield curve </a> as an ominous sign. Some experts say there's more to the story.

This week, 2- and 3-year Treasury yields rose above the 5-year Treasury yield, a development that's hit the broader market in recent sessions and sparked <a id="43d38802-9f3b-3b5c-a78e-ba56869e55e8" href="https://www.businessinsider.com/bank-stocks-bear-market-sell-off-down-the-most-in-18-months-2018-12?utm_source=intl&amp;utm_medium=ingest"> a notable decline in rate-sensitive bank stocks </a> .

An inversion is typically seen as a signal that investors are souring on economic growth expectations, but the indicator's track record is checkered. The yield curve has inverted prior to every US recession over the past 50 years with varying periods of lead time, according to Credit Suisse, but stock-market gains have also followed.

"Importantly, equities rose 15-16% on average in the 18 months following inversions, with a range of -11% to +30%," the firm's equity strategy team, led by Jonathan Golub, wrote in a note on Thursday.

A more widely monitored spread, the difference between the 2- and 10-year Treasury yields, has not yet inverted, but <a id="f4be01a0-4c5d-3bf3-aa89-0afb587bae88" href="https://www.businessinsider.com/bond-markets-are-sending-an-economic-warning-signal-2018-12?r=UK&amp;IR=T?utm_source=intl&amp;utm_medium=ingest"> fell this week to 12 basis points, the lowest level in 11 years </a> . Shorter-dated bonds traditionally carry less risk — and lower yields — than their longer-dated counterparts, since investors are committing capital for a shorter period of time.

Investors examining the yield curve as a standalone indicator are missing exogenous factors that should point to strong economic activity like the "Trump tax cut, the strong non farm payroll growth, the high ISM this week, and the fact that the Fed is still raising rates," said Torsten Sløk, chief international economist at Deutsche Bank.

Why, Sløk asked, would the market bet so highly on a December interest-rate hike if the yield curve was truly reflecting a troubled economy?

"The yield curve is simply not consistent with everything else that is going on, most importantly the incoming data," he said Wednesday evening in an email.

Others echo a concern about the period of time between the inversion and downturns that have followed.

The biggest thing investors miss in considering the yield curve as an indicator is the lag time between an inversion and when the economy and markets respond, said Brad McMillan, chief investment officer for Commonwealth Financial Network, which manages $156 billion.

He added: "When the yield curve inverts, it is a yellow light – not a red one."

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Traders work on the floor of the New York Stock Exchange earlier this week.

Everyone freaking out about an inverted yield curve is forgetting some things

<a id="69685348-e77b-3a01-a596-e7267c35b98b" href="https://markets.businessinsider.com/stocks/aapl-stock?utm_source=intl&amp;utm_medium=ingest"> Apple </a> suppliers took a beating Thursday after the Taiwanese iPhone lens maker Largan Precision reported a big decline in sales, becoming the latest supplier to fall under pressure as <a id="d7b98d00-758d-32f4-ad9a-12c76a0fd70e" href="https://markets.businessinsider.com/news/stocks/apple-stock-price-mounting-fears-smartphone-slowdown-2018-12-1027779569?utm_source=intl&amp;utm_medium=ingest"> fears of a slowdown in the smartphone market </a> take hold.

Largan Precision shares tumbled nearly 10% in premarket trading after the company reported a 29% drop in November revenue compared to the same month last year.

The move had ripple effects for other Apple suppliers. <a id="e0d3b166-b421-39a2-aa9b-9a1e1af95e89" href="https://markets.businessinsider.com/stocks/lite-stock?utm_source=intl&amp;utm_medium=ingest"> Lumentum </a> , which last month <a id="3f4e7d76-8ffd-3f20-a490-c1aad523a300" href="https://www.businessinsider.com/r-apple-shares-drop-after-iphone-supplier-lumentum-cuts-forecast-2018-11?utm_source=intl&amp;utm_medium=ingest"> slashed its own revenue and profit forecasts </a> , shed 6% while semiconductor maker Micron fell 3%. <a id="97c7ac01-0b05-3b1d-ae47-ae8c8a34ca86" href="https://markets.businessinsider.com/stocks/txn-stock?utm_source=intl&amp;utm_medium=ingest"> Texas Instruments </a> and <a id="d5313694-edcc-3870-a85d-2aa5e9454762" href="https://markets.businessinsider.com/stocks/intc-stock?utm_source=intl&amp;utm_medium=ingest"> Intel </a> both slid 2%.

Meanwhile, Apple fell more than 2% ahead of the opening bell as international markets sold off following <a id="899eba5a-58f0-351f-a134-d45b847c2bd3" href="https://www.businessinsider.com/canada-arrests-huawei-cfo-at-us-authorities-request-report-2018-12?r=UK&amp;IR=T?utm_source=intl&amp;utm_medium=ingest"> the arrest </a> of the Chinese tech giant Huawei's chief financial officer, underscoring US-China trade tensions.

Thursday's selling followed Apple's decline on Tuesday, when it fell more than 4% after HSBC analysts <a id="ecd35423-6d79-3110-a650-c6d24b7cbf3d" href="https://markets.businessinsider.com/news/stocks/apple-stock-price-mounting-fears-smartphone-slowdown-2018-12-1027779569?utm_source=intl&amp;utm_medium=ingest"> downgraded the stock in an in-depth report </a> and supplier Cirrus Logic <a id="dfbc3055-c979-38c7-a0d8-673a2433fb3f" href="https://markets.businessinsider.com/news/stocks/cirrus-logic-updates-third-quarter-fiscal-2019-outlook-1027776909?utm_source=markets&amp;utm_medium=ingest?utm_source=intl&amp;utm_medium=ingest"> cut </a> its own revenue forecast due to "recent weaknesses in the smartphone market."

Some Wall Street analysts have tempered their own expectations for Apple's growth. Goldman Sachs slashed its price target on the stock <a id="113d581a-fc3c-3098-ae9e-e452f05cf576" href="https://markets.businessinsider.com/news/stocks/apple-stock-price-falls-into-bear-market-after-goldman-sachs-cuts-price-target-2018-11-1027743639?utm_source=intl&amp;utm_medium=ingest"> three times in November </a> .

Apple was up 0.4% this year, barely outperforming the S&amp;P 500 in the same time.

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People stand in an Apple store in Manhattan.

Apple suppliers are sinking after an iPhone lens maker reported a big drop in sales (AAPL, TXN, MU, LITE)

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Apple suppliers are sinking after an iPhone lens maker reports a big drop in sales (AAPL, TXN, MU, LITE)

<a id="69685348-e77b-3a01-a596-e7267c35b98b" href="https://markets.businessinsider.com/stocks/aapl-stock?utm_source=intl&amp;utm_medium=ingest"> Apple </a> shares have taken a beating of late, and a growing roster of Wall Street analysts say a slowdown in its iPhone cycle is to blame.

But the reason for the slowdown may be more straightforward than investors think, according to some analysts.

iPhone owners are holding onto models for longer periods as their quality improves and theaverage selling price rises, leading to a slowdown in the product's replacement cycle, said Angelo Zino, senior equity analyst at CFRA.

Apple "continues to try to push toward these higher-price devices, and we think that is continuing to cause a slowdown in the replacement cycle," Zino said on Tuesday, adding he doesn't see that as a broader warning for the state of the US consumer.

He told Business Insider that he expects the current iPhone cycle to trend down for the first time since 2007. That year, on the heels of the global financial crisis and due to high comparable numbers, revenue fell 12% and units sold slid 8%.

Apple <a id="b74236ad-d664-303e-a5e7-7290b101f129" href="https://www.businessinsider.com/apple-will-no-longer-report-iphone-sales-unit-numbers-2018-11?utm_source=intl&amp;utm_medium=ingest"> said in its quarterly earnings report last month </a> that it would no longer disclose the number of units sold for products including the iPhone, an announcement that weighed on the stock during the <a id="95407a4b-d533-3798-abb8-285dd8947d90" href="https://www.businessinsider.com/apple-q4-2018-earnings-iphone-sales-revenue-eps-analysis-2018-11?utm_source=intl&amp;utm_medium=ingest"> November earnings call </a> .

Still, Zino remains a bull, even as some of his peers have turned bearish on Apple. He maintains a "buy" rating with a price target of $255, implying a 45% rise from current levels, and said he would change his tune on Apple if he saw a meaningful reduction in the company's active user base.

"The most ominous sign, and the most tell-tale sign that the Apple bull story could decline, is the decline of its installed base at some point," Zino said in a phone interview, adding he remains bullish on the company's free cash flow.

Others echo a similar sentiment. The iPhone "ownership period is lengthening: users are not upgrading as frequently as they used to, possibly a combination of high retail prices but also because a significant step-up in technology upgrades means that users are more likely to want to wait for the next wave of upgrades," HSBC analysts led by Erwan Rambourg wrote in a sweeping Apple report on Tuesday.

The firm downgraded the stock to a "hold" rating, from "buy," and lowered its price target to $200 from $205. HSBC followed other Wall Street firms like Goldman Sachs, which cut its price target on the stock <a id="113d581a-fc3c-3098-ae9e-e452f05cf576" href="https://markets.businessinsider.com/news/stocks/apple-stock-price-falls-into-bear-market-after-goldman-sachs-cuts-price-target-2018-11-1027743639?utm_source=intl&amp;utm_medium=ingest"> three times in November </a> .

Some of Apple's suppliers, too, have cut their guidance in recent months because of falling iPhone demand. On Tuesday, the Texas-based semiconductor manufacturer Cirrus Logic slashed its revenue guidance for its fiscal third quarter of 2019 due to a weakening smartphone market. Last month, the Austrian semiconductor manufacturer AMS <a id="5d6461aa-6dfe-311a-abd3-4f783b931fcf" href="https://www.businessinsider.com/r-apple-supplier-ams-cuts-forecast-indicating-poor-iphone-demand-2018-11?utm_source=intl&amp;utm_medium=ingest"> cut its revenue forecast </a> , suggesting slowing iPhone demand, days after chipmaker Lumentum <a id="cb185cfe-231d-35fc-a40c-2728e4884bce" href="https://www.businessinsider.com/r-apple-shares-drop-after-iphone-supplier-lumentum-cuts-forecast-2018-11?utm_source=intl&amp;utm_medium=ingest"> slashed its own revenue and profit expectations </a> .

Apple shares were down 22% in three months, but up 3.9% this year.

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There's a simple reason people aren't buying iPhones like they used to (AAPL)

<a id="69685348-e77b-3a01-a596-e7267c35b98b" href="https://markets.businessinsider.com/stocks/aapl-stock?utm_source=intl&amp;utm_medium=ingest"> Apple </a> shares fell 2% early Tuesday after one of its suppliers cut its guidance for 2019 and a Wall Street firm downgraded the stock, exacerbating concerns about what's seen as a slowdown in the tech mammoth's iPhone cycle.

The semiconductor manufacturer Cirrus Logic said Monday evening that it expected <a id="8cd36ecf-6d0d-3558-ab9a-b69e0fb4f86c" href="https://markets.businessinsider.com/news/stocks/cirrus-logic-updates-third-quarter-fiscal-2019-outlook-1027776909?utm_source=intl&amp;utm_medium=ingest"> third-quarter revenue to come in lower than previously forecast </a> , citing "recent weakness in the smartphone market."

The company <a id="f02abd68-ab65-397a-a5ee-81d60a3c3626" href="https://markets.businessinsider.com/news/stocks/cirrus-logic-updates-third-quarter-fiscal-2019-outlook-1027776909?utm_source=intl&amp;utm_medium=ingest"> said in a release </a> that it expected revenue of between $300 million and $340 million, compared to its previous expectation of a range between $360 million and $400 million.

Cirrus Logic is one of a growing roster of Apple suppliers to cut their own forecasts due to waning smartphone demand. Last month, Austria-based AMS <a id="3ff20ab2-236c-3352-affa-a7360237909b" href="https://www.reuters.com/article/us-ams-results/apple-supplier-ams-cuts-forecast-indicating-poor-iphone-demand-idUSKCN1NK0YH"> cut its revenue forecast </a> , and other suppliers like Lumentum and British chip manufacturer IQE tempered their own expectations.

The suppliers' reports come amid sweeping concern on Wall Street that Apple is experiencing a slump in the smartphone market, and that its best days are behind it.

Tuesday morning, HSBC analysts downgraded the stock in an in-depth analysis, <a id="a2f3a35d-3342-3888-ae54-58e322ffe31c" href="https://www.cnbc.com/2018/12/04/apple-downgraded-by-hsbc-who-said-iphone-maker-is-facing-the-reality-of-market-saturation.html"> citing overwhelming dependence </a> on a single product.

Apple said last month in its quarterly earnings report that it would <a id="b87d4221-9ea4-34cd-a40b-8d8867ce1cab" href="https://www.businessinsider.com/apple-will-no-longer-report-iphone-sales-unit-numbers-2018-11?utm_source=intl&amp;utm_medium=ingest"> no longer disclose </a> how many iPhones, iPads, and Macs sold each quarter, an announcement that slammed the stock.

Wall Street analysts are concerned. Goldman Sachs, for its part, cut its price target on the stock three times in November, the last of which came after the Wall Street Journal reported the company <a id="8c7da6df-a657-3a5a-af0b-20bb18863732" href="https://www.businessinsider.com/apple-will-no-longer-report-iphone-sales-unit-numbers-2018-11?utm_source=intl&amp;utm_medium=ingest"> slashed production orders </a> for all three iPhones models launched in September.

Apple shares were up 5% this year, slightly outperforming the S&amp;P 500.

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Apple slides amid mounting fears of a smartphone slowdown (AAPL)

<a href="https://markets.businessinsider.com/stocks/aapl-stock?utm_source=intl&amp;utm_medium=ingest" id="69685348-e77b-3a01-a596-e7267c35b98b"> Apple </a> shares fell 2% early Tuesday after one of its suppliers cut its guidance for 2019 and a Wall Street firm downgraded the stock, exacerbating concerns about what's seen as a slowdown in the tech mammoth's iPhone cycle.

The semiconductor manufacturer Cirrus Logic said Monday evening that it expected <a href="https://markets.businessinsider.com/news/stocks/cirrus-logic-updates-third-quarter-fiscal-2019-outlook-1027776909?utm_source=intl&amp;utm_medium=ingest" id="8cd36ecf-6d0d-3558-ab9a-b69e0fb4f86c"> third-quarter revenue to come in lower than previously forecast </a> , citing "recent weakness in the smartphone market."

The company <a href="https://markets.businessinsider.com/news/stocks/cirrus-logic-updates-third-quarter-fiscal-2019-outlook-1027776909?utm_source=intl&amp;utm_medium=ingest" id="f02abd68-ab65-397a-a5ee-81d60a3c3626"> said in a release </a> that it expected revenue of between $300 million and $340 million, compared to its previous expectation of a range between $360 million and $400 million.

Cirrus Logic is one of a growing roster of Apple suppliers to cut their own forecasts due to waning smartphone demand. Last month, Austria-based AMS <a href="https://www.reuters.com/article/us-ams-results/apple-supplier-ams-cuts-forecast-indicating-poor-iphone-demand-idUSKCN1NK0YH" id="3ff20ab2-236c-3352-affa-a7360237909b"> cut its revenue forecast </a> , and other suppliers like Lumentum and British chip manufacturer IQE tempered their own expectations.

Tuesday morning, HSBC analysts downgraded the stock in an in-depth analysis, <a href="https://www.cnbc.com/2018/12/04/apple-downgraded-by-hsbc-who-said-iphone-maker-is-facing-the-reality-of-market-saturation.html" id="a2f3a35d-3342-3888-ae54-58e322ffe31c"> citing overwhelming dependence </a> on a single product, CNBC reported.

Apple said last month in its quarterly earnings report that it would <a href="https://www.businessinsider.com/apple-will-no-longer-report-iphone-sales-unit-numbers-2018-11?utm_source=intl&amp;utm_medium=ingest" id="b87d4221-9ea4-34cd-a40b-8d8867ce1cab"> no longer disclose </a> how many iPhones, iPads, and Macs sold each quarter, an announcement that slammed the stock.

Wall Street analysts are concerned. Goldman Sachs, for its part, cut its price target on the stock three times in November, the last of which came after the Wall Street Journal reported the company <a href="https://www.businessinsider.com/apple-will-no-longer-report-iphone-sales-unit-numbers-2018-11?utm_source=intl&amp;utm_medium=ingest" id="8c7da6df-a657-3a5a-af0b-20bb18863732"> slashed production orders </a> for all three iPhones models launched in September.

NOW WATCH: <a href="https://www.businessinsider.com/what-happens-when-you-dont-get-enough-sleep-2017-12?utm_source=intl&amp;utm_medium=ingest" id="11b2a0bc-a6b2-3adb-a1e6-64ad65fcc60a"> A sleep expert explains what happens to your body and brain if you don't get enough sleep </a>

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