Should Investors Buy Amazon Stock Instead of Walmart? | AMZN STock Analysis | WMT STock Analysis
Summary
Parkev Tatevosian, CFA conducts a comparative analysis between Amazon and Walmart, highlighting that Amazon has recently surpassed Walmart in trailing 12-month revenue. Parkev Tatevosian, CFA notes that while Walmart's management has performed admirably in catching up to Amazon's e-commerce dominance using its physical store network, the two companies diverge sharply in profitability. Amazon's operating margins have improved to over 12%, whereas Walmart's margins remain low at roughly 4%, primarily because shipping goods to individual homes is less profitable for Walmart than traditional in-store shopping.
Parkev Tatevosian, CFA further explains that valuation is where the disparity between the two companies becomes most evident. Despite Amazon's heavy spending on artificial intelligence and data centers, Parkev Tatevosian, CFA observes that it trades at a lower forward price-to-earnings ratio than Walmart. Using a discounted cash flow model, Parkev Tatevosian, CFA determines that Amazon is currently undervalued by the market, while Walmart is receiving excessive credit for its recent successes, leading to an overvalued stock price.
Mentioned Stocks
Reasoning: Parkev Tatevosian, CFA highlights Amazon's superior operating margins of 12.14%, driven by the AWS segment's 30%+ margins. Parkev Tatevosian, CFA references a forward P/E of 27.8 and calculates a fair value of $297, concluding that the stock is undervalued at its current price of $242.
Reasoning: Parkev Tatevosian, CFA argues Walmart is overvalued with a forward P/E of 37.5, which is unusually high for a brick-and-mortar retailer compared to a tech company. Parkev Tatevosian, CFA calculates a fair value of $73 per share, significantly lower than its market price of $109, and notes its lower operating margins of 4.16%.