Does Amazon Finally Have a Real Challenger?

Shares of Amazon.com (AMZN) dipped almost a full percentage point in early morning trading on Wednesday. This was on news that Google and Walmart are forming a partnership to take on the retail giant. Things haven’t gotten any better today. AMZN is currently down an additional 1.08% as I write this. Many investors are wondering right now if Amazon’s decade-long upwards run might finally be coming to an end.

Let’s take a look first at what this partnership between Google and Walmart actually entails. Google and Walmart are planning to bring Google’s online expertise to Walmart’s massive retail operation. The new name for this platform will be “Google Express.” It will allow users to order items through Google’s online presence directly from Walmart’s physical locations. With free shipping for orders over a certain amount, this new partnership is a direct challenge to Amazon’s Prime service.

Shares of Walmart are up today on the news. Walmart has been trying to offer Amazon a head on challenge for years. Google’s share price hasn’t seen the same bump, however. This is odd considering Walmart is only the largest contributor to Google’s platform. Google will also be including companies like Target, Costco and Bed Bath and Beyond in this service. Now, that could be enough to scare shareholders of a mammoth company like Amazon.

There’s more to a company’s share price than just the latest news, however. The news cycle might be enough to cause some price swings, but the real details for shareholders are always in a company’s fundamentals. Amazon still has an edge on Google there.

Last quarter, Amazon brought in $38.0 billion in net sales, a 25% increase over the year ago quarter. Notably, Amazon also hosted its third annual Prime Day in July, which was the largest ever shopping event in Amazon’s history, and that’s really saying something.

Meanwhile, Amazon’s net income was only $197 million, or $0.40 per share. Now, this was well below economists’ expectations of $1.40 EPS. However, Wall Street barely batted an eye at this earnings miss. They know Amazon is in a transition phase, where its cloud computing services are playing a larger role. Amazon is also expanding its reach with its plans to buy Whole Foods Market. All this could help insulate Amazon even further from Google Express.

Amazon has also already released its outlook for the third quarter. The company expects revenue to range between $39.25 billion and $41.75 billion. This is in line with the Street view, which calls for $39.93 billion in revenue.

Add it all up, and AMZN still carries a Buy rating in my Portfolio Grader service. Google, on the other hand, is rated a Hold in Portfolio Grader. That’s why I’m not too worried yet about any threats Google’s new partnerships might hold for Amazon. Fundamentals are what determine a stock’s value, not big headlines. I urge you to stay tuned in to this blog to discover even more about your favorite stocks’ fundamentals in the days and weeks to come.

Sincerely,

signed: Louis Navellier

Louis Navellier

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