We spent much of last week collecting e-commerce and payments-related data. That long-form TEK2day report is on the back burner for now. In the interim we share our general thoughts on e-commerce and one retail giant in particular.
The retail space is having difficulty overcoming COVID having suffered record bankruptcies. Brooks Brothers is the latest casualty to be reported in the business press but there are countless other stories that go unreported. Therefore, while COVID is shifting more retail activity online, many retailers are permanently closed for business. Retail bankruptcies will continue for many months and offset a portion of the mix shift to e-commerce. While many investors are thrilled that companies such as Square (ticker: SQ), Intuit (ticker: INTU) and PayPal (ticker: PYPL), will benefit from participating in the execution of PPP, investors would be wise to keep the bankruptcy headwind in mind.
Two companies that ought to largely power through COVID include Amazon (ticker: AMZN) and Walmart (ticker: WMT). We recently wrote about Amazon’s massive COVID investment of $4 billion-plus which may result in a second AWS-like opportunity. In terms of Walmart, the Bentonville, AR retail juggernaut has quietly assembled a formidable e-commerce business with LTM revenue of $41 billion (8% of total LTM revenues). In the tables below we have comped Walmart’s e-commerce business to online furniture retailer Wayfair (ticker: W), to get a sense as to what WMT’s e-commerce business may be valued as a standalone operation (WMT e-commerce is larger and growing faster than Wayfair). Our math suggests Walmart shares may be 30-50% under-valued.
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