The Amazon Stock Story No One's Talking About

Amazon stock at $1,000 per share has been the story, but what interests this trader is the AMZN-WMT market cap dichotomy

Chris Prybal
May 31, 2017 at 10:02 AM
facebook twitter linkedin


Considering Amazon.com, Inc. (NASDAQ:AMZN) stock's watershed $1,000-per-share moment, also of interest is that AMZN’s market cap is approaching $500 billion ($476 billion as of May 26), while the market cap of Wal-Mart Stores Inc (NYSE:WMT) stood at $237 billion. I know $1,000 is a big deal, but a less-than-obvious consideration would be this 2:1 difference in market capitalizations.

A few obvious reasons for the dichotomy would be that Amazon has a much higher growth potential versus Wal-Mart. AMZN has less of a retail footprint and has beaten WMT online, and Amazon Web Services is a monster of a company in and of itself. Evidence is in the numbers, as AMZN’s P/E ratio of 187 is stodgy compared with WMT’s 18.

Another -- though less than obvious -- reason would be that Wal-Mart stock pays a steady and rising 2.61% dividend yield, while AMZN stock has yet to pay a dividend to shareholders. This dilution by returning cash to shareholders reduces the value of WMT and its market capitalization.

The chart below plots both companies' market cap (left-hand scale) with a ratio of AMZN/WMT market caps on the right-hand scale. You’ll note that the 2:1 comparison has never been reached before. At the beginning of 2015, Wal-Mart was worth twice as much as Amazon. What a change of events!

amazon walmart stocks market cap


And although Amazon stock is priced at twice the value of WMT, ponder the fact that just last year, Wal-Mart had revenue of $486 billion (up 1% YOY) -- the most of any publicly traded company and weirdly identical to AMZN’s current market cap -- whereby Amazon clocked sales of $136 billion (up 27% YOY). If anyone noticed, that is 3.6 times as much as AMZN.

I’m not suggesting shorting AMZN stock here and going long WMT; it would be an expensive trade, anyhow, with Amazon shares in the stratosphere. I'm simply highlighting a few facts that may go “unnoticed” by today’s headline-obsessed media, especially in relation to Amazon's peers.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter