We recently compiled a list of the 10 Best E-Commerce Stocks To Invest In. In this article, we are going to take a look at where Walmart Inc. (NYSE:WMT) stands against the other e-commerce stocks.
An Overview of the E-Commerce Industry
According to a report by Forbes, the e-commerce industry is expected to grow to a valuation of $7.9 trillion by 2027 from $6.3 trillion in 2024. In 2027, 23% of retail purchases are expected to be made online, up from 20.1% in 2024.
An increase in consumer confidence, after a period of sluggish growth, has been a key catalyst in improving the position of the e-commerce industry. On July 30, Reuters reported that the consumer confidence index, in the US, increased to 100.3 in July after it was revised down to 97.8 in June. Previously, experts predicted the index to fall to 99.7 after reaching 100.4 basis points. Chief Economist, Dana Peterson, suggested that while consumers remain resilient they are concerned over rising prices and interest rates. However, despite an uncertain macroeconomic environment, e-commerce companies are taking advantage of the current consumer sentiment by reducing prices. Companies like Target have also revised their profits for FY 2024 as lowered prices have drawn more customers.
To shed light on the state of online retail, US Mastercard Economics Institute Chief Economist, Michelle Meyer appeared in an interview on Yahoo Finance on August 16. Online retail sales went up by 8.2% in July, compared to a 2.9% growth rate in July 2023. She further explains that personal finances, time efficacy, and the overall state of the labor market impact which sites consumers choose to shop from. Meyer also added that in the past quarter, the average individual in the United States saw an appreciation in wealth, which has a positive bearing on consumer spending and therefore 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 over fast fashion, and the increasing use of technology are different forces shaping the industry. In the first quarter of 2024, the US pushed to ban TikTok in the country, which mongered fear among Chinese e-commerce sites such as Shein and Temu. In April, law-making agencies in the US suggested a ban on Temu over labor rights infringement. Moreover, on August 21, Shein sued Temu over copyright infringements. The former suggested that Temu stole the company’s designs and trade secrets resulting in Temu losing money over every sale. Despite such, the founder of Temu, Colin Huang, stands as the wealthiest person in China with a net worth of $51.4 billion, as of August 22. You can also take a look at the best Chinese stocks to buy now.
On the other hand, e-commerce sites in the United States are trying to win against their competitors using advanced technology. Walmart, for instance, launched a generative AI search tool that customers can prompt and get a list of ideal products or items needed. For example, a customer who wants to throw a birthday party, but is unaware of the items needed, could use the search tool to save time. Similarly, Amazon launched Rufus, an AI shopping assistant, earlier this year. Rufus is capable of personally assisting a shopper and helping them find the right products. While we discuss technology, we cannot ignore eBay’s magical listing tool for sellers backed by artificial intelligence. The tool can analyze images, categories, and titles to curate product descriptions, prices, and shipping costs. You should also read our piece on the latest AI news and analyst ratings you should not miss.
As the e-commerce industry grows, it is crucial to know which companies are pioneering the race. You can also read our piece on 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 holdings of e-commerce ETFs and screened for Internet Retail companies on the Finviz stock screener. We sorted our screen by market cap and looked at the 20 largest e-commerce companies. We picked stocks that were the most widely held by institutional investors, as of Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Note: All pricing data is as of August 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A manager standing in a hypermarket, pointing out items available for wholesale.
Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 95
Walmart Inc. (NYSE:WMT) is one of the biggest retail companies in the world that operates retail outlets, wholesale units, and e-commerce sites in more than 20 countries serving 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 $100 billion in e-commerce sales in the fiscal year 2024, up from $73 billion in FY 2022. Walmart Inc. (NYSE:WMT) is also a well-known brick-and-mortar retailer with 10,500 stores globally.
Sellers or small business owners sell all kinds of products on the Walmart Marketplace including staples, toys, and electronics. On the other hand, customers use it to purchase clothes, appliances, and furniture.
Walmart Inc. (NYSE:WMT) is a top e-commerce platform in the US 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, all of which make quick deliveries possible. In the past 12 months, within the US, Walmart delivered 4.4 billion items on the same day or the next day, and 30% were delivered within three hours.
Walmart’s (NYSE:WMT) strengths are not limited to its stringent supply chain, but also its strong customer network. To enhance customer connection, the company launched the Walmart App, Curbside Pickup, and Built for Better, all of which facilitate consumers to buy products with ease.
The company’s journey to customer-centric innovation is not recent. In 2022, Walmart Inc. (NYSE:WMT) launched its Text to Shop AI tool to help customers add items to their cart by just chatting with a bot. Fast forward to FQ1 2025, the company launched a generative AI-powered product search tool and a data analytics platform allowing customers to shop more effectively and receive intuitive product recommendations based on their likes and dislikes.
Walmart’s e-commerce footprint is increasing, as evidenced by a 36% growth in sellers on its marketplace in the fiscal first quarter of 2025. As the company continues to integrate AI and make its platform more personalized for users, it can gain a higher share.
Analysts are bullish on WMT and their 12-month median price target of $81 points to an 8% upside from current levels. Overall, WMT was held by 95 hedge funds at the close of Q2 2024 with total stakes amounting to $9.19 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $3.08 billion.
WMT is currently trading at 30 times this year’s earnings estimate, higher than the sector’s forward P/E of 18. While there’s a premium here, analysts expect earnings to grow 21% this year to $2.45.
Overall WMT ranks 2nd on our list of the best e-commerce stocks to buy. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
