Amazon’s shopping ecosystem is probably more valuable than Walmart’s


Daria Nipot


My thesis is that Amazon (NASDAQ: AMZN) commerce ecosystem is much more valuable than that of Walmart (WMT). Previously, I covered Amazon on July 31.

Amazon’s quarters coincide with calendar quarters, but Walmart’s quarters end a month late. When we talk talking about periods like 2Q22 in this article means the quarter to June 2022 for Amazon and the quarter to July 2022 for Walmart.

Current and future volume

Since 4Q20, Amazon and Walmart have moved a similar volume in their ecosystems. Both systems move close to $150 billion per quarter, but Amazon’s system has historically grown much faster through 4Q20:

Volume of goods

Volume of goods (Author’s spreadsheet)

* Our estimate for Amazon’s 3P GMV is 3.75 times sales.

Walmart tends to be reluctant to share its market numbers online, so some of its volume above is understated. In other words, some of Walmart’s “sales” above are commissions from their marketplace, so the volume figure is a multiple of the sales commission figure.

If we ignored the impact of the COVID pandemic and just looked at volumes from 1Q18 to 4Q20, we would be extremely optimistic about the growth of Amazon’s commerce ecosystem. At this point, we would give Amazon’s commerce system a much higher valuation than Walmart’s. Online commerce has stabilized since 4Q20, so we see the future outlook differently now, but Amazon still has huge potential.

Most of Walmart’s sales are in-store, while the above sales for Amazon are online. Excluding AWS, Amazon had $101,495 million in revenue in 2Q22 and 73% of that, or $74,430 million, came from North America. By numbers of the United States Census Bureauthere has been a surge in online sales during the COVID pandemic, but I expect US online sales to increase as a percentage of overall sales in the coming years:

Online sales as % of overall sales

Online sales as % of overall sales (US census)

We see above that online penetration in the US is just under 15% right now, which is well below the levels seen in other countries. According to the Office for National Statistics, online sales were 26.3% of all retail in the UK during the month of July.

There are many reasons why online sales continue to climb as a percentage of overall sales. E-commerce systems like Amazon can be more competitive than in-store systems on price because there is little shrinkage online. It is also more convenient to shop online, where the selection on Amazon is vast compared to any physical store. Online penetration is sure to continue to climb in the United States over the coming decade. Although Walmart offers online sales, this increase in online penetration in the United States benefits Amazon more than Walmart.

other considerations

Several segments are excluded from the above volume figures. Physical stores, subscriptions and advertising are excluded for Amazon and their sales figures for 2Q22 are as follows:

$4.7 billion in physical stores

$8.7 billion in subscriptions

$8.8 billion in advertising

Amazon’s advertising segment is special. The first quarter I see it broken outside of “other” and into its own segment is from 4Q21 Release where we see it was only $5 billion in 3Q20. The growth to $8.8 billion in just 7 quarters has been remarkable. This segment has more opportunities than what we see for Walmart because it is online rather than in-store. It is more effective than the ad systems we see at Google (GOOG) (GOOGL) and Meta (META) because that’s where people actually shop online. According to my post from July 31, I think the advertising segment alone has a valuation range of $260 billion to $305 billion.

The memberships and other revenue segment is excluded for Walmart above and that figure was $1.5 billion for the July 2022 quarter.


Walmart’s market capitalization at the time of this writing is approximately $368.4 billion based on 2,714,237,937 shares outstanding as of August 31, 2022 and September 7 price per share of $135.74 . I think Amazon’s business segments are worth a lot more than that number.

My thoughts on Amazon’s rating haven’t changed much since my July 31 post. Again, I believe the advertising segment is worth between $260 billion and $305 billion. I think the 1P, 3P, brick-and-mortar, and subscription segments have a cumulative valuation range of $505 billion to $555 billion.

Adding AWS gives Amazon as a whole a valuation range well above current market cap in my opinion, so the stock is undervalued.


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