Inc (NYSE: WMT) is supposed to be losing market share to Amazon.com Inc (NASDAQ: AMZN) every year, curtailing good prospects for the world’s largest retailer. However, in the last month, Wall St. has voted for Walmart as its stock has tracked the broader market, and Amazon’s has fallen.
Walmart’s shares are off 2% in the last month to $95. The S&P 500 is down 1%. Amazon’s shares are off 10% to $1,500.
The variation in stock prices has as much to do with the fact many investors believe Amazon is overvalued as that Walmart has a brilliant future. In the last five years, Amazon’s share price is up 282%. However, the company continues to be only marginally profitable in some quarters. Its e-commerce business is strong, but it has challenges in its consumer electronics and cloud businesses
Amazon has bet the future of its electronics business on Alexa powered devices. Alexa is a sort of artificial intelligence home management system. Google and Apple Inc (NASDAQ: AAPL) are in the same business, and each has the balance sheet to challenge Amazon
Amazon Web Services is the leader in the cloud computing business based on market share. However, Google and Microsoft Corporation (NASDAQ: MSFT) are chasing it, and have the customers bases, technology, product management, and marketing strength to pull business from AWS
Walmart’s prospects can be laid out more easily. It has made a great deal of progress in e-commerce both according to management and based on evidence from its earnings. It remains the largest company in the U.S. by both sales and employees. Its retail footprint is such that most Americans live within a few miles of a Walmart. While its same-store sales are not soaring, they are up slightly.
Amazon and Walmart are in a horse race, but Amazon is in many others as well. And, while diversity can be an advantage, competing across many markets carries risks.