2 Spots to Buy Amazon as It Continues to Win Share From Rivals
Share gains against Walmart and The Trade Desk keep us bullish long-term.
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There are two reports out that confirm Amazon AMZN continues to win not only consumer wallet share, but market share with its higher-margin advertising business. While we have ample upside to our 12-month price target to maintain our One rating, we do see the relative strength index (RSI) for AMZN shares clocking in at 69.42, on the verge of crossing over into overbought territory. For that reason, we would suggest members hold off adding the shares near-term. We see a better pickup spot near $202, and a compelling one at $195 should the stock pull back to such levels.
That First Report and Consumer Wallet Share
PYMNTS Intelligence recently published the report, “Tale of Two Shoppers: Amazon for Discretionary Spending, Walmart for Groceries and Basics.” It revealed shifts in consumer behavior and showed Amazon making progress in food as well as several other categories.
What stood out in the report was Amazon winning share in discretionary purchases, which we see supporting our view that consumers continue to embrace digital shopping to help fend off the pinch of inflation. The report also shows that Walmart WMT “remains largely tethered to essential goods.”
Despite Walmart’s continued dominance in food, Amazon has made a “meaningful boost” in this category, capturing 2.7% of the total U.S. market in 2024, up from 2.3% the previous year. Highlights from the report include:
In the last three months of 2024, Amazon accounted for 3 out of 10 purchases of all electronics and appliances.
Even in a category traditionally strong for Walmart, Amazon’s share of the health and beauty markets has steadily increased to match Walmart’s at 6.8% in 2024, even surpassing it in 4Q 2024.
In clothing and apparel, Amazon’s lead is even more pronounced, capturing 16.2% of spending in 2024 compared to Walmart’s declining share of 6.4%.
The Second Report and Advertising Share Gains
Adweek reports advertisers are shifting millions of dollars in ad budgets, particularly in connected TV (CTV), from The Trade Desk’s TTD demand-side platform (DSP) to Amazon’s. Key reasons include lower fees, improved user interface, greater measurement visibility, exclusive live sports, Prime Video’s growing reach, and a more collaborative partnership model.
Included in Adweek’s report were the following comments:
A first media buyer at an agency, who spoke on the condition of anonymity, said 30% of its clients shifted a bulk of their CTV and display budgets from The Trade Desk to Amazon, particularly around Thursday Night Football.
A second media buyer at an agency, speaking anonymously to preserve industry relations, said 30% of the agency’s clients shifted 100% of their total annual ad budgets from The Trade Desk to Amazon in the past six months. Last year, only 10% of the agency’s clients moved budgets.
One global auto brand moved approximately $80 million in annual ad spend from The Trade Desk to Amazon’s platform by the end of Q1, according to an adtech executive familiar with the deal, speaking anonymously to protect industry relations. Part of the reason for the move is that the brand can now sell its cars on Amazon.
At PMG, 80% of clients have shifted tens of millions in CTV budgets to Amazon’s DSP over the past year, money that was previously going to The Trade Desk, said Mike Treon, PMG’s head of CTV and video strategy.
According to Karsten Weide, principal and chief analyst, W Media Research, advertisers and agencies are moving budgets from The Trade Desk to Amazon’s DSP, particularly for CTV and cost-sensitive campaigns.
This helps explain the sequential and year-over-year revenue gains Amazon’s advertising business has garnered despite the obvious seasonality in the December quarter:
4Q 2023: $14.7 billion
1Q 2024: $11.8 billion
2Q 2024: $12.8 billion
3Q 2024: $14.3 billion
4Q 2024: $17.2 billion
1Q 2025: $13.9 billion
It also suggests this business should continue to grow nicely in the coming quarters, helping deliver further margin improvement and EPS growth along the way.
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At the time of publication, TheStreet Pro Portfolio was long AMZN.
