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The Digital Frontier: A Stock Market Showdown Between Shopify and Walmart

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In the epic saga of commerce, Shopify (NYSE: SHOP) and Walmart (NYSE: WMT) once roamed starkly different landscapes. Shopify thrived solely in the realm of e-commerce, while Walmart, a behemoth of brick-and-mortar sales, dominated the physical retail world.

Fast forward to today, and these two Goliaths find themselves engaged in a fierce battle, their paths converging more closely than ever before. Shopify, true to its roots, remains a digital powerhouse, while Walmart has embarked on a journey of digital transformation, investing colossal sums to ramp up its online presence. The dividends from Walmart’s digital push are beginning to show.

Embrace the Digital Revolution

The winds of change blow digital. It took Walmart some time to embrace this reality, a journey marked by revenue stagnation and even retraction. Walmart’s revenue growth plummeted from double digits to near-zero over two decades, partially due to market saturation. By 2018, the retail giant was closing more doors than opening, trimming its store count by over 1,000, a trend now reversed. In a bid to tackle the relentless onslaught from online colossus Amazon, Walmart underwent a radical transformation, injecting millions into automated shipping facilities and innovative services like Walmart+. The results? A resurgence in revenue growth rates, with e-commerce leading the charge. Last quarter, net sales soared by 3.4%, driven by a remarkable 17% surge in online sales. What was once a market saturation quandary has now become a springboard for growth, with 90% of the U.S. populace residing within a ten-mile radius of a Walmart, offering a unique omnichannel experience that Amazon struggles to replicate.

Conversely, Shopify’s tale began and remained digital. A pioneer in e-commerce facilitation, Shopify empowered merchants to set up shop swiftly and seamlessly in the online realm. In a world where Amazon dictated the terms of sale, Shopify’s platform provided autonomy and agility, replete with sophisticated features like web design, inventory management, and payment processing.

While Walmart reports a modest 5% to 6% annual sales growth, Shopify’s growth eclipses the competition, boasting over 20% annual sales expansion. This contrast underscores the advantage of Shopify’s laser-focused approach on the high-growth e-commerce sector.

The battle lines are drawn, whether it is Walmart’s digital resurgence or Shopify’s unwavering digital DNA–the future is indisputably digital. In this digital age, both contenders stand to prosper.

Choosing the Winner

As digital knights joust for market dominance, the timeless question looms–which to champion? To decipher this dilemma, a glance at each contender’s valuation proves enlightening. Shopify, a tech-centric David in a realm of Goliaths, bears a lofty price tag, trading at 14 times its sales. In contrast, Walmart carries a more modest valuation of just 0.75 times its sales.

Further scrutiny reveals Shopify’s free-cash-flow yield limping at 0.9%, contrasting sharply with Walmart’s robust 3.1% hold. On the earnings front, Shopify’s stock commands a whopping 870 times earnings, dwarfing Walmart’s more conservative 31 times earnings ratio.

Deciphering the cryptic language of valuations, a portrait emerges–investing in Walmart embraces a slower-growth model with keen cash flow and profitability, while Shopify serves as a beacon for those dreaming of astronomical growth figures, propelled by a strategy that sacrifices immediate profit for sustained growth.

The choice between the two knights in shining armor boils down to your time horizon and appetite for risk. Shopify’s fortress stands on a foundation of unassailable technology and market share, promising a meteoric growth trajectory that could potentially dwarf its premium valuation. In the opposite corner, Walmart charts a steady course, navigating a multi-decade pathway toward e-commerce glory, notwithstanding its formidable physical sales empire that sets a cap on growth rate aspirations. Walmart’s prudent valuation mirrors this reality, offering a sanctuary for risk-averse investors.

Unveiling the Hidden Gems

As the market bell tolls, signaling the time to invest, whispers from the wisdom of the ages trickle forth. The Motley Fool Stock Advisor, a compendium of investment acumen spanning two decades, reveals the treasury–the top ten stocks of the hour, with Shopify ensconced in the elite circle. But heed the call, for behind the curtain lie nine other treasures, awaiting discovery.

Delve into the 10 stocks

*Stock Advisor returns as of April 4, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ryan Vanzo has positions in Shopify. The Motley Fool has positions in and recommends Amazon, Shopify, and Walmart. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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