Amazon.com, Inc. (AMZN.US) VS Walmart Inc. (WMT.US): Who is the winner?

Recently, it has been a special day for Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), especially as Amazon announced that its same-day fresh delivery service now covers over 1000 cities, with plans to expand to over 2300 by the end of 2025. This is not just about delivering milk and eggs, as meat, seafood, and even AirPods can all be placed in the same shopping cart and delivered within a few hours. This is good news for Amazon, but investors in Instacart, Walmart, and DoorDash have already anticipated negative impacts - as soon as the news was released, the stocks of these three companies fell by 11.8%, 7.9%, and 2% respectively, while Amazon rose by approximately 2.4%. Amazon, with its economies of scale, has more room for growth and is venturing into new areas of expansion: whether it's the 18% year-on-year growth in AWS revenue to $30.87 billion in the second quarter (exceeding expectations), or its advertising business performing well. On the other hand, this means more pressure for competitors in the industry, especially Walmart. While Walmart is trying to catch up, intensifying competition from Amazon and other rivals could bring greater pressure - escalating price wars, rising costs, and the need for companies to increase investments in technology and logistics to stay competitive in the e-commerce sector, which could affect profit margins, even the profit margins of Walmart's U.S. digital business this year. However, challenges also bring opportunities, and Walmart + membership momentum was strong in the previous quarter, achieving double-digit growth. The latest news is that Walmart has ended its four-year exclusive partnership agreement with The Trade Desk, which means its shopper data is now open to multiple advertising technology platforms, attracting more advertisers, increasing monetization flexibility, and better competing with Amazon's advertising business. Amazon's advertising business grew by 23% year-on-year in the last quarter to $15.69 billion, exceeding the expected $14.99 billion. Investors' concerns are justified, as Amazon's actions indicate that it is integrating fresh shopping into the Prime ecosystem - by offering cheaper delivery services and more shopping incentives to members to retain customers. Despite the intensifying competition in the e-commerce sector, Amazon is not resting on its laurels; it continues to leverage economies of scale to capture market share from competitors such as Walmart, Costco, Instacart, Kroger, DoorDash, and others. Currently, fresh food accounts for about 43% of retail sales in the U.S., but online sales account for only 15%. With the increasing penetration rate of online fresh food delivery next year, there is a huge market space waiting to be explored. Amazon is best positioned to tap into this market, attracting more consumers to shift towards online ordering. This is not only because of the convenience brought by new features but also because it already has a large user base - data shows that Amazon has over 310 million monthly active users, with over 80% of them in the U.S. This means that Amazon's online fresh food market has significant growth potential and has given it a significant advantage that cannot be ignored. However, Walmart has an advantage in the fresh food sector - it is a well-known fresh food brand, which Amazon cannot match. With over 10,500 stores and clubs in 19 countries, as well as its own e-commerce website, Walmart has a broad customer base: approximately 255 million weekly customer visits in 2024, and still growing (2.4 billion in 2023, 2.3 billion the previous year). While this reflects Walmart's stable fundamentals and scale advantages, two facts remain unchanged: 1. It is more susceptible to macroeconomic uncertainties than Amazon; 2. With Amazon's new operations, competition between the two will intensify. Overall, Amazon is the better choice. So far this year, Amazon has lagged behind its competitors, with a gain of approximately 4.4%, while DoorDash has risen by about 50%, Walmart by 11.8%, and the S&P 500 index by 9.9%. This underperformance does not signal a negative trend but is due to Amazon's diversification, making it susceptible to broader market events. However, in the long term, it has the potential for sustained growth and is suitable for long-term holding. The market is now eagerly awaiting the interest rate cut in September. The current debate is not about whether the Fed will cut rates in September, but whether it will be by 25 basis points, 50 basis points, or more. Although this will have an impact on both companies (consumers will be more willing to spend), it is clear that Amazon will be the winner, for the reasons mentioned above and more. Basically, Amazon's risk-reward ratio is more optimistic at the current price level, especially considering its underperformance compared to its peers so far this year, which means that it is likely to rebound under various positive catalysts. Analysts now maintain a "sell" rating for Walmart and have upgraded Amazon to a "strong buy" - since July, Amazon has risen by about 3%, matching the performance of the S&P 500 index. From a valuation perspective, Amazon is still in a better position. Forward-looking valuations show that although Walmart's growth prospects are slower, its valuations in most areas are higher than Amazon's. Walmart's forward non-GAAP P/E ratio is 38.51, while Amazon's is 34.01; Walmart's forward GAAP P/E ratio is 39.11, compared to Amazon's 34.16. This means that despite Amazon having stronger growth momentum, investors are paying a higher P/E ratio for Walmart. In terms of PEG ratio, Walmart's forward non-GAAP PEG is 4.86, while Amazon's is 1.89. Looking at the forward enterprise value/EBITDA (EV/EBITDA), Walmart is at 19.49 times, compared to Amazon's 14.80 times - Walmart is trading at a premium of 84% above the industry average, while Amazon is at a premium of 37%. The only aspect where Walmart appears cheaper is in the forward enterprise value/sales (EV/sales) ratio, which is 1.25 times, lower than Amazon's 3.48 times, but this reflects Amazon's expected faster revenue growth and higher profit margin opportunities. Overall, Walmart's valuation resembles that of a high-growth stock without corresponding growth, while Amazon's premium matches its growth trajectory. Amazon's current stock price is $234, with a rise of over 3.5% on Thursday, nearing the high point of $236.5 in early August. The stock price is above all exponential moving averages (EMAs), with the 21-day EMA serving as short-term support at $224, the 50-day EMA as mid-term support at $219.5, and the 200-day EMA as the long-term trend baseline at $207. The relative strength index (RSI) is currently at 60.9, indicating that it is not overbought yet and shows potential for upward movement. If the stock price breaks through the resistance level of $236.5, it could rally towards the $242-245 range. After reclaiming the 21-day EMA and 50-day EMA, the stock price is showing a bullish continuation pattern. Walmart's current stock price is $100.9, unchanged on Thursday, pulling back from the high point of $104.7 in August and staying above all EMAs (similar to Amazon's support levels). Momentum has cooled off after a recent rally, but the overall trend remains bullish; the RSI is at 57.4, trending down from recent highs. Trading volume is average, with increased volume on declines, suggesting that sellers are taking profits after the stock price rose to $104. This leads to my next point: although Walmart's daily chart is still in an uptrend, it may enter a consolidation phase after reaching a peak. Buyers need to hold the $99-$98 range to avoid a larger pullback, so investors should keep a close eye on it. This article is compiled from the WeChat public account "US Stock Research Society"; Author: The Techie; GMTEight Editor: He Yucheng.