Amazon vs. Walmart: Which Stock Is the Better Buy for 2025?

Core Viewpoint - Walmart has significantly outperformed Amazon in 2024, with a nearly 80% year-to-date increase compared to Amazon's 47% return, positioning Walmart as a strong contender for continued success in the retail sector [2]. Company Performance - Walmart has transformed itself into the largest grocery store in the U.S., accounting for over 25% of all grocery sales [3]. - The company boasts a vast physical presence, with 90% of the U.S. population located within 10 miles of a Walmart store, enhancing customer convenience [4]. - Walmart's revenue grew by 5.5% last quarter, with operating income increasing by 8% and adjusted earnings per share (EPS) rising by 14% [6]. - Walmart's digital advertising segment, Walmart Connect, contributed significantly to its operating income gains, highlighting the importance of online marketing solutions [6]. Competitive Landscape - Amazon's North American retail segment saw a 9% revenue increase and a 33% rise in operating income last quarter, indicating robust growth despite Walmart's success [7]. - Amazon is also expanding into the grocery sector with Amazon Fresh and Whole Foods, although these segments are less critical to its overall business compared to Walmart [8]. - Amazon's AWS cloud computing business remains its largest profit driver, with a 19% revenue growth and operating income of $10.4 billion last quarter [9]. Innovation and Future Outlook - Both companies are leveraging artificial intelligence (AI) to enhance revenue growth and operational efficiency, with Amazon focusing on AI applications in cloud computing and logistics [10]. - The valuation gap between Amazon and Walmart has narrowed, with Amazon trading at a forward P/E ratio of 36 and Walmart at 34 [11]. - Despite Walmart's strong performance, Amazon's higher revenue growth and AI opportunities make it a preferred choice for 2025 [12]. Market Dynamics - Walmart's scale and buying power have allowed it to offer competitive pricing, attracting both its core customer base and more affluent shoppers amid high inflation [13].