This Retail Giant's Stock Is an Absolute Bargain. It's Cheaper Than Walmart and Costco.

Ladies and gentlemen, listen up! We're diving into the world of retail giants, and I'm here to tell you that one of them is an absolute steal. You heard it right! This stock is cheaper than Walmart and Costco, and it's time to take notice. Let's break it down!

First things first, let's talk about the elephant in the room: Amazon. Yes, you heard it right! Amazon is the retail giant we're talking about. Now, you might be thinking, "But isn't Amazon already overpriced?" Well, let me tell you, the numbers don't lie. Amazon's stock is trading at about 30 times forward earnings, which is cheaper than Walmart and Costco. Walmart trades for 32 times earnings, and Costco trades for a lofty 50 times forward earnings estimates. This is a no-brainer!

Now, let's talk about the key factors driving Amazon's valuation. Amazon's strong e-commerce growth and profitability improvements are significant drivers. Amazon's U.S. e-commerce sales grew more than 20% year over year in its most recent quarters, supporting its strong same-store sales growth. This growth is faster than the overall e-commerce market in the U.S., despite Amazon's size. Additionally, Amazon's North America segment produced an operating margin of 6.4% in 2024, up from 4.2% in 2023 and negative 0.9% in 2022. This improvement in profitability is driven by an overhaul of its logistics network to a regionalized model starting in 2023, making it less expensive and faster to move items from its warehouses to customers' homes. Furthermore, Amazon has seen significant growth in its retail media advertising business and other digital ads, which have incredibly high margins. Amazon's ad sales grew 18% in the fourth quarter to $17.3 billion, representing a growing portion of its total revenue.



In comparison, Walmart's operating margin for Walmart U.S. was just 5.2%, and Costco's operating margin over the last 12 months is 3.7%. While Walmart and Costco have also worked to improve their operating margins in recent years, Amazon is making much faster and more promising progress while continuing to grow faster than either brick-and-mortar retailer.

Another key factor driving Amazon's valuation is its massive tech company behind Amazon's retail success, Amazon Web Services (AWS). AWS generated more than $100 billion in revenue last year and produced an operating margin of 37%. AWS's profitability is improving as it scales thanks to strong demand for artificial intelligence infrastructure. AWS generated almost $40 billion in operating income last year, up 62% from 2023. Importantly, it looks like that's poised to continue growing. Management noted demand for compute continues to outstrip its supply. That should provide a long runway of continued growth in 2025, and support Amazon's massive spending on data centers. The company spent $26.3 billion on capital expenditures in the fourth quarter, and CFO Brian Olsavsky said investors can expect a similar run rate throughout 2025. In other words, it'll spend more than $100 billion, mostly on data centers, but also on supporting its retail logistics network and fulfillment capacity.

Now, let's talk about the implications of this for Amazon's stock valuation. As of the writing, Amazon's stock is trading at about 30 times forward earnings, which is cheaper than Walmart and Costco. Walmart trades for 32 times earnings, and Costco trades for a lofty 50 times forward earnings estimates. This suggests that Amazon's stock looks extremely attractive at this current multiple, given its strong earnings growth and improved profitability. The retail giant's e-commerce strategy and growth, while impressive, do not compare favorably to Amazon's in terms of market share, profitability, and stock valuation.



So, what are you waiting for? This is a no-brainer! Amazon's stock is an absolute bargain. It's cheaper than Walmart and Costco, and it's time to take notice. Don't miss out on this opportunity! Buy now!