Amazon Stock: Why It’s a Better Buy Than Walmart & Costco Now
It’s a curious time in retail. While Walmart and Costco continue to demonstrate resilience – and even growth – in a somewhat uncertain economic climate, a different giant is quietly offering investors a potentially more compelling value proposition. Amazon, despite its dominance in e-commerce and burgeoning cloud computing business, is trading at a valuation that suggests the market isn’t fully appreciating its potential. This is particularly fascinating when you consider that Amazon is still outpacing both Walmart and Costco in overall growth, even if it’s from a much larger base.
The Shifting Sands of Retail Valuation
The recent performance of Walmart (WMT) and Costco (COST) is undeniably strong. Both have benefited from consumers seeking value, and their e-commerce operations are thriving. Walmart’s U.S. E-commerce sales climbed 27% last quarter, and Costco’s e-commerce sales jumped 22.6%. However, the market may have already priced in this success, leading to higher valuations. Amazon, is facing a bit of skepticism, largely due to concerns surrounding its massive investments in Amazon Web Services (AWS).
According to research from Marketplace Pulse, Amazon’s e-commerce market share expanded from 34.4% in 2024 to 35.7% in 2025. While the percentage increase might seem modest, the sheer scale of Amazon’s operations means even modest gains translate to significant market share. This is a key point often overlooked when comparing Amazon to its brick-and-mortar rivals. Walmart and Costco still derive the majority of their revenue from physical stores, while Amazon is primarily a digital retailer.
AWS: The Cloud and the Concern
The primary driver of investor caution surrounding Amazon is AWS. While incredibly profitable – generating $45.6 billion of Amazon’s $80 billion in total income from operations in 2025 – AWS requires substantial capital expenditure. Amazon plans to invest over $200 billion this year to build out compute capacity, a move that will likely push free cash flow into negative territory in 2026. This isn’t necessarily a awful thing; it signals confidence in future demand and a willingness to capitalize on market opportunities. However, it does introduce uncertainty, which investors tend to dislike.
CEO Andy Jassy has emphasized the company’s experience in understanding demand signals within AWS and its ability to generate strong returns on invested capital. He believes the current investments will pay off handsomely. Despite these assurances, the market remains hesitant, resulting in a lower valuation for Amazon compared to Walmart and Costco. Currently, Amazon trades at an enterprise value of just 10.8 times analysts’ expectations for its 2026 EBITDA, while Walmart trades at over 21 times and Costco at nearly 30 times.
A Gaze at the Numbers: Why Amazon Stands Out
The discrepancy in valuation becomes even more apparent when looking at earnings per share. Amazon trades at just 27 times forward earnings, while Walmart and Costco trade at 42 and 48 times, respectively. This suggests that investors are significantly undervaluing Amazon, potentially due to concerns about the short-term impact of AWS investments on free cash flow. Analysts expect Amazon’s EBITDA to climb 40% this year and another 23% in 2027, while growth expectations for Walmart and Costco are more modest, at 10% and 8% per year, respectively.
Considering these figures, it’s reasonable to argue that Amazon presents a compelling buying opportunity. Investors may be getting a deal on both the retail business and the cloud computing business. The key is recognizing that the current market sentiment doesn’t fully reflect the company’s long-term potential.
Navigating the Retail Landscape in Austin, Texas
Here in Austin, Texas, we’re seeing the effects of these broader retail trends play out locally. The rapid population growth and tech-savvy consumer base create Austin a key market for all three companies. Amazon has a significant presence with fulfillment centers and delivery infrastructure serving the Central Texas region. Walmart and Costco continue to expand their store footprints to meet the demands of a growing population. The competition is fierce, and consumers are benefiting from lower prices and increased convenience.
Given my background in financial planning and investment analysis, if these trends are impacting your investment decisions here in Austin, or if you’re simply looking to optimize your household budget, here are three types of local professionals you might desire to consult:
- Independent Financial Advisors: Look for a fee-only advisor with experience in long-term investment strategies and a proven track record of navigating market volatility. They can assist you assess your risk tolerance and build a diversified portfolio that aligns with your financial goals. Specifically, seek advisors who demonstrate a deep understanding of the technology sector and its impact on the broader market.
- Consumer Advocacy Groups: Several non-profit organizations in Austin provide resources and support to consumers facing financial challenges. These groups can offer guidance on budgeting, debt management, and consumer rights. Look for organizations with a strong reputation for impartiality and a commitment to protecting consumer interests. The City of Austin Consumer Protection Division is a good starting point.
- Retail Arbitrage & Reselling Consultants: With the rise of online marketplaces, many Austinites are exploring opportunities to supplement their income through retail arbitrage and reselling. Consultants specializing in this area can provide training and guidance on sourcing products, optimizing listings, and managing inventory. Look for consultants with a proven track record of success and a deep understanding of the local market.
Ready to find trusted professionals? Browse our complete directory of top-rated financial advisors and consumer advocates in the Austin area today.