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AMZN or WMT: Who’s Winning the e-Commerce Game?

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This year, eMarketer expects Amazon’s (AMZN) US retail e-commerce sales to be close to $282.52 billion, accounting for 47.0% of the US e-commerce market. Meanwhile, it expects Walmart (WMT) to hold 4.6% of the market, with $27.81 billion in US retail e-commerce sales. According to eMarketer, Amazon and Walmart rank first and third, respectively, in the US retail e-commerce space.

eMarketer has also highlighted that Amazon’s retail e-commerce sales have slowed YoY (year-over-year) since 2017. This year, it expects the sales to grow 20.4% YoY, compared with 28.9% and 23.1% in 2017 and 2018, respectively. The agency also expects Walmart’s US retail e-commerce sales to slow down this year, to 32.7%. Those sales grew 47.2% and 39.3% in 2017 and 2018.

Strategies to capture the retail e-commerce market

Amazon has been leveraging its highly successful loyalty program, Amazon Prime, to grow its e-commerce market share. To learn more, read Amazon Prime: Integral Part of Amazon’s Success Story. The company’s one-day shipping option for Prime members is being touted as a game-changer in the e-commerce segment. In the second quarter, the company invested more than $800 million to develop the infrastructure required for this faster delivery option.

Meanwhile, Walmart is focused on expanding its global online retail presence. In its second-quarter earnings call, the company guided for 35% YoY e-commerce sales growth in fiscal 2020 (this calendar year). To keep up in the race for faster delivery, Walmart had also rolled out next-day delivery in 75% of its US markets by the end of June. The company now plans to focus on further increasing its geographic penetration and e-commerce product range. Additionally, in its earnings call, Walmart said it’s focusing more on boosting its wide-margin categories’ online sales and strengthening its fulfillment network.

RBC Capital Markets optimistic on Amazon

On September 3, CNBC reported that RBC Capital Markets had raised Amazon’s target price from $2,250 to $2,600. The brokerage expects Amazon’s switch from two-day to one-day free delivery for Amazon Prime members to boost AMZN stock by 50%. RBC analyst Mark Mahaney forecasts Amazon’s fiscal 2020 revenue to be $337 billion. After the target price increase, the company’s stock rose 0.76% to close at $1,789.84 on September 3.

Analysts’ recommendations for Amazon

Since Amazon announced its one-day shipping option on June 3, several analysts have upgraded its stock. The 49 analysts tracking Amazon have given it an average target of $2,269.04. That price implies a 26.01% upside in the next year based on the stock’s closing price yesterday. Updates included the following:

  • On June 4, Loop Capital reiterated its “buy” rating for AMZN and raised its target price from $2,200 to $2,380.
  • Credit Suisse reiterated its “outperform” rating and raised its target from $2,200 to $2,250 on July 24.
  • On July 26, Bank of America Merrill Lynch reiterated its “buy” rating and raised its target from $2,300 to $2,350. Pivotal Research reiterated its “buy” rating but reduced its target from $2,750 to $2,615. MKM Partners resumed coverage of AMZN with a “buy” rating and target price of $2,350.

Analysts’ recommendations for Walmart

On average, the 32 analysts tracking Walmart have set its target at $118.33. That price implies a 2.38% upside in the next year based on the stock’s closing price yesterday. Updates for the stock included the following:

  • On July 11, Goldman Sachs initiated coverage of Walmart with a “buy” rating and target of $123.
  • On August 16, Bank of America Merrill Lynch reiterated its “buy” rating and raised its target from $120 to $135. Telsey Advisory reiterated its “outperform” rating and raised its target from $118 to $125. Gordon Haskett upgraded WMT stock from “accumulate” to “buy” and set its target price at $125.

Amazon or Walmart in retail e-commerce?

Although Walmart has a long way to go before catching up with Amazon in retail e-commerce, it’s working hard to bridge that gap, according to Vox. Walmart is focusing on expanding its product range, strengthening the fulfillment network, and bolstering marketplace offerings, Vox reports. However, Vox adds, “Multiple sources tell Recode that the company is projecting losses of more than $1 billion for its US e-commerce division this year, on revenue of between $21 billion and $22 billion.” While it may be too early to consider Walmart a threat to Amazon’s retail e-commerce leadership, it’s still important for investors to keep an eye on the race.

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