Walmart Inc. (NYSE: WMT) announced strong earnings, and its strategic moves in the past year have impressed investors. Its shares are up 32% in the past year, while the S&P 500 is higher by 20%. However, the stock of its primary rival, Amazon.com Inc. (NASDAQ: AMZN), has risen 72% over the past two years. Much of this gain happened in 2024.
Walmart’s revenue in the most recent quarter was up almost 6% to $173 billion. Earnings dropped 12% to $2.03 per share. E-commerce rose 23%, and ad revenue rose an impressive 28% to 33%. Despite this advertising revenue increase, Walmart has a long way to go. Amazon holds about 12% of the digital advertising revenue in the United States, behind Meta (20%) and Google (28%). (Eleven things to never buy at Walmart.)
Walmart remains primarily a brick-and-mortar retailer, albeit the largest one in the United States. Its valuation reflects the legacy costs of operating in buildings with a large number of employees. The company has over a million workers in the United States. It cannot transform its business enough to escape that fact, which will cap its valuation in terms of market cap to revenue. Amazon trails Walmart in revenue, but its market cap is $475 billion, and Amazon’s is $1.74 trillion.
Finally, Amazon has Amazon Web Services (AWS), the largest cloud computing business in the United States. Cloud computing operations tend to get higher multiples than retail. Some analysts would say AWS is worth as much as Amazon’s retail business. If so, that would explain the valuation difference between Walmart and Amazon.
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