Online retailer Amazon and US retail giant Walmart have long been in a neck-and-neck race for US customers. However, if JPMorgan has its way, the e-commerce giant should finally overtake its US rival.
• Amazon and Walmart fight for US retail market
• According to JPMorgan, Amazon could overtake Walmart
• Morgan Stanley also sees Amazon ahead in the beauty sector
The competition between the online mail order company Amazon and the retail giant Walmart for the important US market has lasted for many years. Because even if Amazon makes more sales and profits than Walmart overall, Walmart still has the edge in US retail. According to an assessment by JPMorgan, however, this could soon change.
Different start to the year
The two trading houses started the new year in fundamentally different ways. Amazon was able to surprise positively in terms of sales and profit in the first quarter of 2023. Revenue rose to $127.4 billion, up 9 percent year-on-year. Meanwhile, profits rose by around 30 percent to almost five billion US dollars. For the second quarter of 2023, the company expects sales of between $127 and $133 billion, while earnings are expected to be between an estimated $2 and $5.5 billion.
As Walmart’s balance sheet revealed in the first quarter of fiscal year 2024 (January to March 2023), the US company had to struggle more with high inflation and higher interest rates. Profits fell 18.5 percent year-on-year to $1.67 billion. However, the company was able to increase sales by 7.6 percent to 152.3 billion US dollars. Meanwhile, Walmart raised its guidance for fiscal 2024. After sales growth of 2.5 to 3 percent had previously been assumed, 3.5 percent was now estimated. The company also became more optimistic about profits. Instead of around 3 percent, this should now increase by 4 to 4.5 percent.
JPMorgan sees Amazon ahead
If the US investment bank JPMorgan has its way, however, it should now be decided once and for all which of the two large corporations in US retail will take the crown. According to Yahoo Finance journalist Allie Garfinkle, the US bank looked in particular at the prospects for the US retail market as a whole, as she explains in a Yahoo Finance video in an interview with Rachelle Akuffo. The e-commerce sector in particular has experienced a real roller coaster ride in recent years, with a boom in the wake of the corona pandemic and then a decline in 2022. Garfinkle explains that online trade in the USA will start in 2022 has grown again by less than percent since 2009.
JPMorgan would now expect growth to return here in 2023, particularly from Amazon. The financial house assumes that Amazon’s gross merchandise business will grow by more than eleven percent to USD 477 billion in 2023. In addition, the retail giant would dominate more than 42 percent of the US online retail market.
A new chapter”
Should this projection actually occur, Amazon would overtake Walmart, the largest retailer in the US to date. According to Garfinkle, this would mean “a new chapter” for both companies. However, this would not mean that the battle between the two major companies would then be over, rather it would mean that the race between Walmart and Amazon would become even more heated.
As part of the analysis, JPMorgan reiterated its “Overweight” rating on Amazon stock and also left the price target at $145. Additionally, analyst Douglas Anmuth estimates that Amazon Prime is likely to hit 300 million people this year. The average revenue achieved per Prime customer should also increase.
Morgan Stanley relies on Amazon in the beauty sector
Incidentally, U.S. retail isn’t the only area where Amazon is threatening to overtake Walmart. As Bloomberg reports, the major US bank Morgan Stanley assumes that the group, which was founded by billionaire Jeff Bezos, is also likely to become the US market leader in the beauty sector. The team of analysts led by Simeon Gutman predicts that the online mail order company will surpass Walmart as the largest US beauty retailer by 2025. The retail giant would claim a 14.5 percent market share by 2025, which would equate to a valuation of $180 billion.
According to Gutman, the growth in the beauty sector should come from the fact that the e-commerce giant is steadily expanding its market share in online retailing, namely to an estimated 46.5 percent by 2025.
Jefferies also optimistic
In addition to these two major US banks, the analyst firm Jefferies recently published an analysis of Amazon, leaving the rating on “buy” and raising the price target from 135 to 150 US dollars. Jefferies is particularly hoping for the recovery of the AWS cloud division and also assumes that Amazon should also benefit from the current AI trend, as analyst John Colantuoni writes.
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