Why Walmart's 5% growth is good, but Amazon's 10% growth is bad
Amazon hasn’t passed Walmart in revenue yet. Market cap is a whole different story.
When Amazon’ssales rose just 10% last quarter, investors were disappointed. This morning, when Walmart posted a quarterly revenue jump half that size, it was cause for celebration. The big-box retailer’s stock was up nearly 8% premarket.
Someday soon, Amazon will likely pass Walmart in total revenue, but it hasn’t happened yet.
Of course, despite both being known for their giant consumer-goods businesses, Amazon is a very different company than Walmart. While 5% revenue growth is great for a pure retail business like Walmart, a 10% growth rate is historically on the low side for Amazon. JPMorgan does expect Amazon to overtake Walmart in gross merchandise value, or the total amount sold through their marketplaces but not necessarily coming to the retailers, this year.
Meanwhile, Amazon’s valuation is more than three times Walmart’s, having surpassed its market cap back in 2015. That’s because, in case you forgot, Amazon’s also a tech company. In addition to its huge retail business, its Web Services business also drives revenue and is highly profitable. In its latest quarter, Amazon’s net income was $13.5 billion, compared with Walmart’s $4.5 billion.
Still there’s a lot the same about these two giant businesses. Walmart’s Amazon-like e-commerce business continues to climb. And both are increasingly making money selling ads. Walmart’s ad business was up 26%, while Amazon’s grew 20%.
