Amazon and Walmart Stand Strong in a Slowdown—But One’s a Bargain and the Other’s Pricey
When economic uncertainty looms, consumer habits shift—spending slows, except on essentials like groceries and household items. That’s where retail giants like Walmart and Amazon shine, making them potential safe-haven stocks. But while both stand to benefit, they come at very different price tags.
Walmart and Amazon are competing for cost-conscious shoppers, but each brings a unique value. Amazon, known for innovation and its growing AI-powered cloud business, has often been grouped with Big Tech. That’s worked both for and against it—especially recently, as investor sentiment turns defensive.
AI-driven hype once inflated Amazon’s valuation, but as recession fears rise, attention has shifted to more traditional, resilient plays like Walmart. Historically, Walmart has thrived in downturns, and its stock performance reflects that: up 6% this year with a forward price-to-earnings (P/E) ratio around 34. Amazon, on the other hand, is down nearly 20%, now trading at a much lower forward P/E of about 25.
Put in historical context, the numbers are striking. Since 2005, Walmart’s average forward P/E is around 18, while Amazon’s is an eye-popping 93. So while Walmart appears pricey relative to its norm, Amazon is relatively cheap—perhaps even overlooked. Morningstar analyst Noah Rohr pegs Walmart’s fair P/E closer to 22–23, suggesting it may be overvalued at current levels.
The divergence stems from how investors view the two companies. “It all depends on how you classify Amazon,” says Dan Romanoff, senior analyst at Morningstar. “Most still treat it as a tech stock, while Walmart is seen as a recession-proof staple.”
Despite recent market pessimism, Amazon’s earnings outlook remains strong. EPS is projected to grow from $5.53 in 2024 to $7.47 by 2026. Walmart’s growth is more modest—expected to move from $2.51 in FY2025 to $2.93 in FY2027.
Amazon’s profitability has been pinched by heavy investments in data centers, with some skepticism over returns amid underwhelming generative AI demand. But Romanoff believes utilization will catch up quickly as AI needs expand.
Amazon’s core e-commerce business also remains dominant, thanks to unmatched fulfillment, delivery speed, and a booming ad business. Bernstein analysts highlight its strong competitive moat.
Walmart, too, has tailwinds. It generates 60% of revenue from groceries, a consistently strong segment, and its digital business is growing over 20% annually. Bernstein expects double-digit growth to continue and sees room for margin expansion through automation and efficiency gains.
Looking at price targets, Wall Street remains bullish on both. Amazon has an average target of $215 (24% upside from current levels), with 93% of analysts rating it a “Buy.” Walmart’s consensus target is $107 (about 12.6% upside), with 86% bullish sentiment.
However, Morningstar’s more conservative valuations tell a different story: $240 for Amazon (39% upside) and just $63 for Walmart (37% downside), emphasizing the importance of digging beneath surface-level optimism.
In the end, investors need to weigh whether Walmart’s resilience is already fully priced in—or if Amazon’s recent decline presents a chance to buy into long-term strength at a discount.
