Amazon's Performance Leaves Wal-Mart in the Dust

We appreciated the comments from Eric Savitz's June 30 Seeking Alpha article in which he pointed out that Cowen analyst Jim Friedland raised his rating on Amazon (AMZN) and referred to Amazon as a “next-generation Wal-Mart."

Friedland noted that Amazon has 9.5 percent of the U.S. book market and thinks it is well positioned to gain share in other categories. He noted that the company is only 0.3 percent of U.S. retail sales, versus 7.7 percent for Wal-Mart (WMT). "Amazon is a next-generation Wal-Mart," he contends. "The company's focus on lower prices and a superior shopping experience versus online and offline competitors will result in substantial share gains over time."

We also believe that Amazon is a next generation Wal-Mart, and it is interesting to see which the "market" is backing and believes to be the up and coming winner.

Comparison of Approximate Share Price Returns as of June 30:

Amazon vs. Wal-Mart Over the Past Four Years (source: BigCharts.com):

Our money is on Amazon....

Disclosure: No positions currently, but AMZN is included in our model portfolio.

Comments

[Mad Hedge F...:]

They certainly cashed in on the Jackson thing. You would think that the copyright holder on the Jackson titles, Sony (SNE), would do well, but not so. Instead, Amazon (AMZN) stock took off, offering for sale the top ten selling Jackson CD’s by the King of Pop. Most of them sold out in a day. I guess it’s a new world out there. Those with the best selling machine, win.

Jul 02 11:21 AM

[Ted Hurlbut:]

I think the analogy of thinking of Amazon as the next Walmart is spot on, although Walmart trades in highly commoditized core basics and Amazon is driven by the Long Tail. That said, as internet spending continues to capture an increasing percentage of the overall retail dollar, Amazon is positioned to claim more than it's fair share.

Jul 02 04:33 PM

[RMichael:]

With all of the pressure on state budgets, you need to consider the possibility of legislation compelling Amazon, and other online retailers, to begin collecting sales tax for all of the states, not just those where they have a physical presence. This would remove a key advantage, especially for the higher-priced (and higher profit) items.

Jul 02 08:50 PM

[johngonole:]

Not only is taxaction an issue but Walmart also has an online website. Right now it mostly sells what is in its own stores. But the online retail space is probably a pretty low cost of entry for a lot of retailers. Walmart basically offers free shipping if you pick up the item in their store. The point I'm trying to make is that AMZN can't grow limitless without attracting some competition. I use AMZN to read product reviews and then I comparison shop. Often they do have the best price but sometimes they don't

AMZN has a bright future but their is no reason to think they are going to overtake walmart anytime soon in terms of size.

Jul 03 02:38 AM

[LilBob:]

I think where Amazon really shines is in their distribution structure as it pertains to an aging baby-boomer population. In what seems to me an ironic twist, it appears that Baby Boomers are just as savvy as teens when it comes to Internet shopping-while Gen-X-ers tend to be more traditional-preferring brick and mortar stores like their grandparents shopped at. What this means is that as the Baby Boomers reach their Autumn years and face the difficulties with mobility that aging brings a well established online retail brand is an incredibly valuable asset. As the collective knees of America's wealthiest demographic start getting sore those enormous Wal-Mart parking lots are looking much less attractive.

Jul 04 10:15 PM

[HONG KONG BOB:]

During thesew hard times it gets rather sickening to see governments like California as well as our US government ONLY ever thinkiong or considering how to raise MORE taxes versus, truly cutting and eliminating massive portions of government perminently...it's NEVER considered, it's never spoken as a way to rid ourself of the endless balckholes of government and theri need to find more sources of dollars to take from us and to spend on more government. Just why is "reduction in force" and down sizing, and off-shoring ONLY a private business action during tough times? Claifornia is a perfect study of government gone wild and government being too damned big and to big to succeed!

Jul 06 04:34 PM