One To Watch: Is Traditional Retail About To Overtake Amazon?
Kathleen Brooks | Sep 14, 2017 16:25
What: the death of traditional retail in the face of staunch competition from Amazon (NASDAQ:AMZN) has been dissected and talked about for years, as the traditional bricks and mortar retailers failed to keep up with the online behemoth. Amazon’s share price has risen 33% so far this year, although it is 7% lower than the record high of $1083 reached on 27th July.
For Macy’s (NYSE:M), the US department store, things have been bleak and the share price has fallen nearly 50% so far this year. However, things could be about to change. Since late July, Macy’s share price has started to pick up from the lows and is actually outperforming Amazon, as you can see in the chart below.
h3 Amazon versus Macy's/h3How: We believe this could be happening for a few reasons:
- Traditional retail is about to play catch up to the online giants and start giving them a run for their money.
- It could be a sign that demand for the big tech players is starting to wane.
Our hunch is that it is a mixture of the two. We think that some traditional retail companies like Macy’s have started to up their online game, which may improve their earnings potential for the future and is thus a solid reason for the stock price to move higher. However, we doubt that tech stocks will sell off sharply even if Macy’s continues to outperform Amazon.
The other thing to point out is valuation, which is a key theme at this late stage in the stock market rally. After a 50% drop in Macy’s share price, stock is starting to look cheap. This is in direct comparison to Amazon, where the share price trades at 251 times its earnings, relative to 8.1 times for Macy’s. So, while we don’t think that Macy’s is about to pose a meaningful threat to Amazon’s preeminent position in the US retail space, its share price could outperform Amazon in the coming days and weeks as investors hunt for a bargain.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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