Walmart Achieves New All-Time-High Before Amazon

This article highlights an interesting development in the stock market: Walmart has reached a new all-time-high before its competitor, Amazon. The recent stock split likely played a role in Walmart’s rise, pushing it above its previous all-time-high. On the other hand, Amazon is still trying to recover from a peak it hit in July and November of 2021. The article also provides a brief analysis of the earnings reports of both companies, noting that Walmart is focusing on improving its margins while Amazon’s revenue growth seems to have permanently slowed. Ultimately, this article raises the question of whether mature businesses like Amazon are passing the growth mantle to other sectors.

Walmart’s All-Time-High

Walmart, the retail giant, has recently achieved a new all-time-high in its stock price, surpassing even the e-commerce powerhouse Amazon. This significant milestone can be attributed, in part, to a recent 3-for-1 stock split that helped Walmart exceed its previous all-time-high of $56 in November ’23. Currently, Walmart’s stock price is trading around $59, reflecting the company’s strong performance and investor confidence.

Amazon’s Performance

In contrast to Walmart’s impressive stock performance, Amazon has faced some challenges in reaching new highs. Amazon hit what can be described as an “almost perfect double-top” at $188 in both July and November ’21 but has not managed to surpass that level in the following 27 months. Additionally, the resignation of Jeff Bezos as CEO had a significant impact on Amazon’s stock performance. Bezos’s departure coincided with the July ’21 earnings report, leading to a downturn in the company’s stock price. These factors have contributed to Amazon’s slower revenue growth in recent years.

Walmart Earnings Report

In the most recent earnings report for Walmart, the company’s gross margin was a standout feature. In fiscal Q4 ’24, Walmart experienced an increase in gross margin of 122 basis points year over year, reaching 23.97% compared to 22.75% in Q4 ’23. This growth can be attributed to the expansion of the company’s advertising efforts, which saw a significant 28% year-over-year increase to $3.8 billion. While advertising remains a relatively small part of Walmart’s overall revenue, it has contributed to the improvement of the company’s margins. As a result of this strong performance, analysts have raised revenue estimates for Walmart in the coming years, demonstrating the market’s confidence in the company’s continued growth.

Walmart’s Growth Potential

In addition to its recent earnings report, Walmart’s growth potential lies in its return to normal balance sheet and cash flow metrics. The company has successfully navigated through the excess inventory issues of 2021 and 2022, allowing it to regain stability in its financials. Furthermore, the grocery sector, in which Walmart is a major player, is expected to experience continued growth. In the Jan ’24 quarter, grocery sales grew by mid-single-digits year over year, indicating a positive trend for the sector. To drive additional growth, Walmart will need to focus on maintaining and expanding its margins, making it a critical factor in the company’s future success.

Amazon’s Performance in Q4 ’23

Despite the challenges faced by Amazon in reaching new stock highs, the company demonstrated strong growth in the fourth quarter of ’23. Similar to Walmart, Amazon has recognized the importance of margins in driving performance. The company’s operating income in Q4 ’23 exceeded consensus estimates, reaching $13.2 billion, a 26% upside surprise compared to the estimated $10.4 billion. Additionally, Amazon’s operating margin of 7.7% was the highest for the fourth quarter in a decade, indicating the company’s commitment to achieving strong financial results.

Comparison of Walmart and Amazon

When considering the performance of Walmart and Amazon, it is evident that Walmart has established itself as a leader relative to the S&P 500. Walmart’s recent all-time-high stock price surpassing Amazon’s is a testimony to its success. On the other hand, Amazon has struggled to achieve new highs and has lagged behind in stock performance. This raises the question of whether other sectors are poised to take over as growth leaders, potentially shifting the landscape of the market.

Financial Comparison of Walmart and Amazon

A closer look at the financials of Walmart and Amazon reveals some interesting insights. In calendar ’23, Amazon generated $575 billion in revenue and $85 billion in cash flow from operations. Meanwhile, Walmart’s fiscal ’24 revenue amounted to $648 billion with $36 billion in cash flow from operations. While Amazon still maintains a more efficient asset base, Walmart is closing the e-commerce gap, indicating its progress in embracing online retail.

Conclusion

In summary, Walmart’s recent achievement of an all-time-high stock price before Amazon is certainly notable. The company’s strong earnings report, focus on margins, and growth potential in the grocery sector have contributed to its success. On the other hand, Amazon’s performance has been hindered by its slower revenue growth and CEO transition. It remains to be seen whether Walmart’s leadership will continue or if other sectors will take over as growth leaders. As with any investment consideration, it is important to note that past performance does not guarantee future results. Investors should carefully evaluate their own risk tolerance and adjust their portfolios accordingly.