We recently published a list of The 10 best e-commerce stocks to invest in. In this article, we take a look at how Walmart Inc. (NYSE:WMT) compares to other e-commerce stocks.
An overview of the e-commerce industry
According to a report by Forbes, the value of the e-commerce industry is expected to grow from $6.3 trillion in 2024 to $7.9 trillion in 2027. In 2027, 23% of retail purchases are expected to be made online, compared to 20.1% in 2024.
A rise in consumer confidence after a period of sluggish growth has been a key catalyst in improving the e-commerce industry’s position. On July 30, Reuters reported that the U.S. consumer confidence index rose to 100.3 in July after being revised downward to 97.8 in June. Previously, experts had predicted the index would fall to 99.7 after it reached 100.4 basis points. Chief economist Dana Peterson opined that while consumers remain resilient, they are concerned about rising prices and interest rates. Despite an uncertain macroeconomic environment, e-commerce companies are taking advantage of current consumer sentiment by cutting their prices. Companies like Target have also revised their earnings for fiscal 2024 upward as lower prices have attracted more customers.
To shed light on the state of online retail, Michelle Meyer, chief economist of the US Mastercard Economics Institute, appeared in a interview To Yahoo Finance on August 16. Online retail sales increased 8.2% in July, compared to a growth rate of 2.9% in July 2023. She further explains that personal finances, time efficiency, and the general state of the labor market influence which websites consumers shop on. Meyer also added that the average U.S. resident experienced an increase in wealth in the last quarter, which has a positive impact on consumer spending and, in turn, online retail.
What does the competitive e-commerce landscape look like?
The future of e-commerce is unpredictable. Bans on products from China, questions about cheap labor, criticism of fast fashion, and the increasing use of technology are various forces shaping the industry. In the first quarter of 2024, the US pushed to ban TikTok in the country, which stoked fear among Chinese e-commerce sites such as Shein and Temu. In April, lawmakers in the US proposed banning Temu for violating labor rights. In addition, on August 21, Shein sued Temu for copyright infringement. Shein claimed that Temu stole the company’s designs and trade secrets, causing Temu to lose money on every sale. Despite this, Temu’s founder, Colin Huang, is the richest person in China with a net worth of $51.4 billion as of August 22. You can also take a look at the The best Chinese stocks to buy now.
On the other hand, e-commerce sites in the United States are trying to gain an edge over their competitors by using advanced technology. Walmart, for example, has introduced a generative AI search tool that can show customers a list of ideal products or items they need. For example, a customer who wants to host a birthday party but doesn’t know what items they need could use the search tool to save time. It’s a similar story with Amazon, which introduced Rufus, an AI shopping assistant, earlier this year. Rufus can personally assist a buyer and help them find the right products. When we talk about technology, we can’t leave out eBay’s magical listing tool for sellers, which is powered by artificial intelligence. The tool can analyze images, categories, and titles to curate product descriptions, prices, and shipping costs. Also, read our article on the the latest AI news and analyst reviews you shouldn’t miss.
As the e-commerce industry grows, it is important to know which companies are leading the race. Also read our article on the the best advertising stocks to buy according to short sellers.
Our methodology
To compile the list of the 10 best e-commerce stocks to invest in, we looked at the holdings of e-commerce ETFs and searched for internet retail companies using the Finviz stock screener. We sorted our picks by market cap and looked at the 20 largest e-commerce companies. We chose the stocks that were most held by institutional investors in Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Note: All price data is correct as of August 22nd.
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A manager stands in a hypermarket and points to items available for wholesale sale.
Walmart Inc. (NYSE:WMT)
Number of hedge fund owners: 95
Walmart Inc. (NYSE:WMT) is one of the largest retail companies in the world. The company operates retail stores, wholesale units, and e-commerce sites in more than 20 countries and serves over 240 million customers every week. The company’s e-commerce platform provides services to mass consumers, low-income customers, and small business owners. Walmart entered the e-commerce space in 2000 and reported e-commerce revenue of $100 billion in fiscal 2024, up from $73 billion in fiscal 2022. Walmart Inc. (NYSE:WMT) is also a well-known brick-and-mortar retailer with 10,500 stores worldwide.
Sellers or small business owners sell all kinds of products on Walmart Marketplace, including basic groceries, toys, and electronics. On the other hand, customers buy clothes, appliances, and furniture there.
Walmart Inc. (NYSE:WMT) is one of the leading e-commerce platforms in the U.S. and has over 255 million weekly users. The company currently operates 210 distribution centers and has a private fleet of 9,000 tractors, 80,000 trailers and 11,000 drivers that enable fast deliveries. In the last 12 months, Walmart delivered 4.4 billion items in the U.S. on the same or next day, and 30% of those were delivered within three hours.
Walmart’s (NYSE:WMT) strengths are not limited to its rigorous supply chain but also its strong customer network. To improve customer loyalty, the company has introduced the Walmart app, Curbside Pickup and Built for Better, making it easier for consumers to purchase products conveniently.
The company’s journey toward customer-centric innovation is not new. In 2022, Walmart Inc. (NYSE:WMT) launched its Text to Shop AI tool, which allows customers to add items to their shopping carts by simply chatting with a bot. In the first quarter of 2025, the company launched a generative AI-powered product search tool and data analytics platform that will help customers shop more effectively and get intuitive product recommendations based on their likes and dislikes.
Walmart’s e-commerce presence is growing, as evidenced by a 36% increase in sellers on its marketplace in the first fiscal quarter of 2025. As the company continues to integrate AI and make its platform more personal for users, it can gain a higher market share.
Analysts are bullish on WMT and their 12-month median price target of $81 suggests 8% upside from current levels. Overall, WMT was held by 95 hedge funds at the end of the second quarter of 2024, with total holdings amounting to $9.19 billion. As of June 30, Fisher Asset Management was the largest shareholder with a stake of $3.08 billion.
WMT currently trades at 30 times this year’s earnings, above the sector’s P/E of 18. While that’s a premium, analysts expect earnings to rise 21% this year to $2.45.
Total WMT 2nd place on our list of the best e-commerce stocks to buy. While we recognize WMT’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than WMT but trades at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
