scott olson
Few people realize that Walmart (WMT) hit an all-time high before e-commerce giant Amazon (AMZN) hit an all-time high.Recent 3-for-1 stock split likely helped Walmart surpass its all-time high of $56 That changed in November 2023, with the stock trading around $59 tonight.
Amazon hit a near-perfect double top of $188 in July and November 2021, but has yet to recover from that level in 27 months. It’s getting closer, but it’s not there yet.
Few people realized that Jeff Bezos’ CEO resignation happened just around the time of the July 2021 earnings report, causing Jeff to push his stock to a “high” with his resignation.
Quick summary of Walmart and Amazon earnings reports
In the Walmart earnings preview, this blog said WMT was a margin story, but 4QFY24 was a gross margin story, with GM up 122 bps We’re not talking about operating margin, which rose from 22.75% in Q4 2023 to 23.97% year over year. This is driven by AI and supply chain enhancements.
To be honest, I was right for the wrong reasons, but the margin story is just beginning.
Gross profit is supported by advertising, and the conference call noted that advertising increased 28% year-over-year to $3.8 billion, and although it remains a small portion of overall revenue, it is steadily increasing Walmart’s profits. It was done.
Here are key comments from the conference call on food inflation (Source: The Transcript):
Here’s what we learned about Walmart’s metrics:
Walmart management has provided a very lukewarm earnings outlook for FY25 (ending January 2025), but the past two weeks have shown little interest in raising EPS estimates for 2025, 2026, and 2027. It was done.
However, it’s worth noting that even after the “deflationary situation” mentioned in The Transcript note above, Walmart’s earnings forecast continues to trend steadily upward.
Analysts are not afraid to raise their sales forecasts for Walmart in the coming years.
Summary/Conclusion: Walmart is just coming out of an overstock problem in 2021 and 2022, and only in recent quarters have its balance sheet and cash flow metrics returned to normal.
Over the long term, Walmart can continue to capture market share in the grocery market with “mid-single-digit” revenue growth and “low-single-digit” operating profit and EPS growth – Groceries in FY01/24 is growing mid-single digits year-over-year – Walmart will need margins to fuel further growth.
Amazon: Great quarter, stock still below all-time highs
Amazon posted good growth in Q4 2023 compared to a tough quarter in Q4 2022, but here are the bigger long-term changes for Amazon for our readers.
From 2000 to 2021, Amazon experienced year-over-year sales growth of over 20% (with one exception). But its sales growth rate appears to have permanently slowed to half the pace of the past two decades.
This is manageable since Amazon also focuses on margins (like Walmart).
Advertising and AWS drove Amazon’s fourth quarter of 2023, with the e-commerce giant’s operating profit beating significantly. Operating income was $13.2 billion, beating the consensus of $10.4 billion (LSEG) and creating an upside surprise of 26%.
Morningstar noted that Amazon’s operating margin of 7.7% was the highest fourth quarter in a decade.
summary: There was no valuation talk in this post, just a note highlighting Walmart’s leadership versus Amazon’s lag over the S&P 500.
Despite their Magnitude 7 status, we are in an era where Amazon, Alphabet (GOOG) (GOOGL), and Apple (AAPL) have become mature companies and shifted their “growth” spots to other sectors, such as AI stocks. Is it included?
Another metric that I found interesting was that Amazon had revenue of $575 billion in the 23-year calendar, with accompanying operating cash flow of $85 billion for the same period.
Walmart generated $648 billion in FY24, accompanying operating cash flow of $36 billion for the same 12-month period.
Amazon still has a more efficient asset base, but Walmart is closing the gap in e-commerce.
This is not advice or recommendation. Past performance does not guarantee or indicate future results. Investments can result in loss of principal, even over a short period of time. Readers should determine their own comfort with portfolio and individual stock volatility and adjust accordingly.
thank you for reading.
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Editor’s note: The summary bullet points in this article were selected by Seeking Alpha editors.
