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After huge Q2, Amazon is now worth more than Wal-Mart

For the first time, the e-commerce giant has a larger market cap than the world's largest retailer

Financial trends and news by Steven Loeb
July 24, 2015
Short URL: http://vator.tv/n/3ef5

Look, it's well known that brick and mortar retailers have taken a hit due to online shopping. The trends have been going that way for years, even though I always think that the ever-impending death of the physical store is pretty overblown.

If you needed one definitive moment, though, to encapsulate that shift, it would be this: the largest online shopping store has just become more valuable than the world's largest retailer.

As of Friday Amazon has a higher market cap than Wal-Mart. This is the first time this has ever happened,according to the Wall Street Journal. Amazon is now worth $259.08 billion, while Wal-Mart is worth $231.30 billion.

It helps that Amazon's stock is surging, rising 20% at one point to a record high. It is now up 15.29% to $555.90 a share. 

This is all coming after Amazon posted better than expected second quarter earnings on Thursday. The company saw profit of 19 cents per share on $23.18 billion in revenue. Wall Street had expected the company to report a loss of 14 cents a share on $22.39 billion in revenue.

Revenue was boosted by Amazon Web Services, the company's cloud computing business, which rose to $1.82 billion, an increase of 81 year-to-year. The company's operating income in AWS was $391 million, more than four time the $77 million it had seen a year earlier. 

Even before it posted those amazing numbers, Amazon and Wal-Mart were going in different directions. Amazon's stock had risen from $314.75 a share at the beginning of this year to $482.18 at the end of Thursday, a 53% increase. Wal-Mart's stock, meanwhile, dropped 16%, from $86.27 a share to $72.51 a share, in the same time period. 

As you can see in the chart below, courtesty of Quartz, Amazon's sales have long been growing much quicker than those of Wal-Mart, so why is it just now overtaking in terms of value? Because Amazon has often shown little profit. That has nothing to do with how it runs its business, but because Jeff Bezos' management style is to reinvest all of the money the company back into the business. That shouldn't seem like a radical thing to do, but it hasn't made Wall Street very happy.

Now that Amazon Web Service is taking off, though, perhaps the company will start showing the kind of profit that investors have longed to see.

Even though Wal-Mart may be a little down right now, you definitely should not count it out. The company also has a stong e-commerce presence, and it is taking that overseas.

Earlier this week the company announced it had acquired the outstanding shares in Chinese e-commerce company Yihaodian, taking full ownership of its business. Walmart had previously held approximately 51 percent of the company.

Amazon does have a weakness internationally; in the second quarter its sales in North America rose 26^ year-over-year, while international sales only rose 3%. If Wal-Mart can increase its presence around the world, especially in China, it could remain a viable competitor to Amazon for years to come.

For right now, though, Amazon is the champ and the biggest winner in all of this is Bezos. He owns 18% of Amazon's stock, for a $40.5 billion stake in Amazon, which is now worth roughly $8.5 billion.

(Image source: retroist.com)


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