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This Retail Giant's Stock Is an Absolute Bargain. It's Cheaper Than Walmart and Costco.

This Retail Giant's Stock Is an Absolute Bargain. It's Cheaper Than Walmart and Costco.

  • 25.03.2025 10:29
  • theglobeandmail.com
  • Keywords: High Risk, Market Volatility

Amazon stock offers better value than Walmart and Costco, with a lower forward P/E ratio and faster earnings growth. Driven by AWS's strong performance and improved profitability, Amazon is poised for long-term gains despite its retail peers' success.

Amazon ServicesWMTsentiment_dissatisfiedCOSTsentiment_satisfied

Estimated market influence

Walmart

Walmart

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Walmart's stock has seen significant gains but faces potential headwinds from trade policies.

Costco

Costco

Positivesentiment_satisfied
Analyst rating: Buy

Costco has strong sales growth and higher margins compared to competitors.

Context

Analysis: Amazon vs. Walmart & Costco in Retail and Tech

Market Trends

  • Retail Sales Growth: Both Walmart and Costco experienced strong sales growth in 2024, driven by e-commerce advancements.
  • Stock Performance:
    • Walmart shares rose 81% since 2023.
    • Costco shares surged 98% since 2023.
    • Both outperformed the S&P 500 during this period.

Competitive Dynamics

  • Amazon's Positioning: Amazon is positioned as a more attractive investment due to its lower stock valuation and faster earnings growth compared to Walmart and Costco.
  • Valuation Multiples:
    • Amazon: ~30x forward earnings.
    • Walmart: ~32x forward earnings.
    • Costco: ~50x forward earnings.

Financial Performance

  • Earnings Growth:
    • Amazon: Expected EPS growth of 15% in the current year, accelerating to 20% by 2026.
    • Walmart: 9% EPS growth.
    • Costco: 5% EPS growth.
  • Operating Margins:
    • Amazon's North America segment: 6.4% (up from 4.2% in 2023).
    • Walmart U.S.: 5.2%.
    • Costco: 3.7%.

Tech and AWS Impact

  • AWS Growth:
    • Generated over $100 billion in revenue in the last year.
    • Operating margin of 37%, with $40 billion in operating income (up 62% from 2023).
  • Demand Drivers:
    • Increased demand for AI infrastructure and logistics improvements.
    • AWS spending projected to exceed $100 billion in 2025, primarily on data centers.

Long-Term Implications

  • Investment Appeal: Amazon's tech-driven model and faster growth make it a more attractive investment despite high valuations.
  • Strategic Considerations: Amazon's diversified business model (retail + AWS) provides significant long-term growth potential compared to traditional retail giants.

Conclusion: While Walmart and Costco have shown strong performance, Amazon's lower valuation, faster earnings growth, and tech-driven expansion position it as a more compelling investment opportunity.