{"id":128154,"date":"2019-12-03T19:03:30","date_gmt":"2019-12-03T19:03:30","guid":{"rendered":"https:\/\/stockchase.com\/discover\/?p=128154"},"modified":"2019-12-03T19:03:30","modified_gmt":"2019-12-03T19:03:30","slug":"wmt-vs-tgt-and-msft-vs-amzn","status":"publish","type":"post","link":"https:\/\/stockchase.com\/discover\/wmt-vs-tgt-and-msft-vs-amzn\/","title":{"rendered":"Battle of the Stocks : Walmart vs Target and Microsoft vs Amazon"},"content":{"rendered":"

We continue the Battle of the Stocks this week with a new round of American<\/a> names. With the holiday shopping season, we focus on retail with a bit of tech, in other words… Amazon<\/a>. It’s hard to ignore the gorilla in the room, with Amazon<\/a> dominating two spheres: retail and cloud computing. <\/p>\n

Here are this week’s match-ups:<\/p>\n

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Walmart<\/a> vs. Target<\/a><\/p>\n

Walmart<\/a> is the rare brick-and-mortar giant that has withstood the onslaught of Amazon<\/a>. Though once-hated for wiping out mom-and-pop shops in Smalltown Main St. America, Walmart<\/a> has, ironically, survived by adapting to e-commerce. Wisely, Walmart<\/a> learned this lesson whereas other chains (Sears<\/a>) failed and suffered. <\/p>\n

No doubt, Walmart<\/a> is directly competing with Amazon<\/a> and its current battleground is groceries<\/a>. By the end of this year, Walmart<\/a> aims to have 1,600 stores for grocery delivery and 3,100 that offer grocery pickup. <\/p>\n

Meanwhile, Walmart<\/a> is expanding the quantity and selection of online products by partnering with brands like Lord & Taylor and Fanatics. Analysts including Teal Linde<\/a> and Gordon Reid<\/a> applaud these initiatives and expect continued growth for the big-box retailer. <\/p>\n

Year-to-date, Walmart<\/a> stock has slightly outpaced the wider indices by rising over 27%. It pays a sector average 1.79% dividend and trades just under a 24x PE. However, the valuation and single-digit growth rate give Stan Wong<\/a> pause, who wonders how long Walmart<\/a> can keep fighting Amazon<\/a>.<\/p>\n

Overlooked in the Walmart<\/a> vs. Amazon<\/a> war is Target<\/a>. Canadians remember Target<\/a> for its disastrous expansion<\/a> into this country, which lost the retailer nearly US$1 billion by early 2014. The company arrogantly failed to understand this market. <\/p>\n

It has taken a long time for Target<\/a> to recover from that blunder, and it still lags behind Walmart<\/a> in building its e-commerce operation. For this reason, analysts like Zachary Curry<\/a> prefer Walmart<\/a>. <\/p>\n

So, Walmart<\/a> is the winner, right? It will surprise many to read that Target<\/a>‘s stock has outperformed Walmart<\/a>‘s this year by more than three <\/em>times at 88%, and is one of the leading stocks on the S&P for 2019. Its currently reaching all-time highs around $125-126. Also, Target<\/a> trades at a lower 20x PE than Walmart<\/a> and pays a higher 2.1% dividend yield. It’s beaten the street during its last five reports, and just two weeks ago raised its earnings guidance<\/a> heading into the crucial holiday season. Onsite and e-sales grew 4.5% during Q3 compared with 2018, while Target<\/a>‘s income rose nearly 15% for the same period. <\/p>\n

The CEO credits a better shopping experience both in-store and online; Target<\/a> has also expanded its toy selection to fill the gap with the store closures of Toys ‘R Us. Analyst Robert Lauzon<\/a> says that Target<\/a> is firing on all cylinders and it could catch up to Walmart<\/a> to become a duopoly. That said, he still gives the edge to Walmart<\/a>.<\/p>\n

Winner: <\/em>Walmart<\/strong>–but no longer by a country mile. Target<\/a> is catching up and deserves to be on investors’ radars.<\/p>\n

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Microsoft<\/a> vs. Amazon<\/a><\/p>\n

Like Target<\/a>, Microsoft<\/a> is a comeback story<\/a> and is currently touching all-time highs. While its operating system, Windows, still dominates PCs and non-Apple<\/a> laptops, Microsoft<\/a> has grown to become a cloud computing giant, so big that it controversially won the US$10 billion Pentagon deal.<\/p>\n

Wall Street expected Amazon<\/a> to claim that prize. The deal is so pivotal, so high-profile and huge, that Amazon<\/a> is legally challenging<\/a> that decision, citing political interference from Trump who openly feuds with Amazon<\/a> CEO Jeff Bezos. Amazon<\/a> will likely lose, and the deal with swell Microsoft<\/a>‘s coffers, whose market cap tops US$1.155 trillion (with a T).<\/p>\n

Earlier this year, Microsoft<\/a> did the unthinkable and surpassed Amazon<\/a>‘s cap which currently stands at less than US$900 billion. (FYI, Apple<\/a> is worth US$1.2 trillion.)<\/p>\n

Both stocks are Wall Street darlings, with analysts praising them. Folks like Brian Acker<\/a> call Amazon<\/a> the <\/em>growth company, dominant in so many areas, starting in cloud where Amazon<\/a> is number one, e-retailing of course, but also developing rapidly in groceries (threatening big box retailers), shipping (challenging FedEx<\/a> and UPS<\/a>), and streaming as it sells more Prime subscriptions (which tie into Amazon<\/a>‘s one-day shipping program). <\/p>\n

True, Amazon<\/a>‘s PE sits at 80, but Bruce Murray<\/a> is confident that the company’s strong cash flow will raise the stock price. However, Amazon<\/a> is not a slam dunk. This year, analysts have sounded concerns. Stan Wong<\/a> notes that the company’s earnings have declined lately as it pours US$1.5 billion in Q4 alone<\/a> into one-day Prime shipping. Ross Healy<\/a> feels that the FAANGs have had their day in the sun; Amazon<\/a>‘s stock has slipped over 10% from its 2019 high made in early June. <\/p>\n

Anti-trust threats from Washington continue, though Capitol Hill won’t break up the Bezos empire anytime soon. Looking long-term, though, contrarian investor Benj Gallander<\/a> warns of a sharp fall, citing Amazon<\/a>‘s book value of $107 at a fraction of its $1,800 share price.<\/p>\n

In contrast, Microsoft<\/a> is hitting grand slams, that rare bird that attracts unanimous buy signals from analysts. In recent years, Microsoft<\/a> has re-positioned itself as the biggest cloud computing company only behind Amazon<\/a>. <\/p>\n

Before the Pentagon deal, MSFT<\/a>‘s cloud growth was 65%. Further, David Fingold<\/a> observes that the regular payments by clients for cloud services makes MSFT<\/a> like a utility, enjoying a reliable stream of revenues. On top of that are the reliable sales from Windows OS. All this makes Microsoft<\/a> a money-printing machine, says Brooke Thackray<\/a>. <\/p>\n

There’s so much cash that last September, Microsoft<\/a> bumped up its dividend by 11% and announced it was buying back US$40 billion in shares. The only caveat is that Microsoft<\/a> is selling at all-time highs around $152 (up from $144 just a month ago), so some analysts like Christine Poole<\/a> call for investors to buy it on pullbacks. <\/p>\n

Meanwhile, you’re paid a not-bad-for-a-tech-stock dividend of 1.54% at a PE of 28, a lot less than Amazon<\/a>‘s.<\/p>\n

Verdict: <\/em>Microsoft<\/strong>. Disclosure, I own Microsoft<\/a>, but I also shop at Amazon<\/a>. Amazon<\/a> is likely safe for the long term, but will likely fall further than Microsoft<\/a> during a recession.<\/p>\n","protected":false},"excerpt":{"rendered":"

We continue the Battle of the Stocks this week with a new round of American names. With the holiday shopping season, we focus on retail with a bit of tech, in other words… Amazon. It’s hard to ignore the gorilla […]<\/p>\n","protected":false},"author":12,"featured_media":93363,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cwp_meta_box_check":"No","cwp_rev_product_name":"","cwp_rev_product_image":"","wppr_links":[],"cwp_rev_price":"","wppr_options":[],"wppr_pros":[],"wppr_cons":[],"footnotes":""},"categories":[17],"tags":[302,404,406,405,367,155,408,407,288,171,218],"class_list":["post-128154","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lists","tag-amazon-effect","tag-american","tag-bezos","tag-cloud-computer","tag-computers","tag-e-commerce","tag-holiday-shopping","tag-pcs","tag-retail","tag-tech-stocks","tag-trump"],"wppr_data":{"cwp_meta_box_check":"No"},"_links":{"self":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/128154","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/comments?post=128154"}],"version-history":[{"count":0,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/128154\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media\/93363"}],"wp:attachment":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media?parent=128154"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/categories?post=128154"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/tags?post=128154"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}