Amazon (NASDAQ:AMZN) has disrupted many retail sectors, but it's repeatedly failed to crack the home improvement market. That's why shares of home improvement leader Lowe's (NYSE:LOW) surged 400% over the past decade as those of other retailers withered.

Amazon and Lowe's aren't direct competitors, but both stocks still look appealing as the COVID-19 crisis batters weaker retailers. Let's see which stock is the better overall buy.

How do Amazon and Lowe's make money?

Amazon generates most of its revenue from its online marketplace, but most of its profits come from Amazon Web Services (AWS), the world's largest cloud infrastructure platform. It surpassed 150 million Prime subscribers last year.

Packages in a warehouse.

Image source: Getty Images.

Amazon subsidizes the growth of its lower-margin marketplaces with AWS' higher-margin revenue, which enables it to expand its Prime ecosystem with loss-leading strategies like digital content, perks, promotions, and free shipping options. Amazon is also the third-largest online advertising platform in the U.S. after Alphabet's Google and Facebook, but that growing business only generates a sliver of its total revenue.

Lowe's shares a near-duopoly in the home improvement market with Home Depot (NYSE:HD). It operates 1,970 stores across the U.S. and Canada, compared to Home Depot's 2,293 stores across the U.S., U.S. territories, Canada, and Mexico.

Lowe's survived the retail apocalypse because it was well-insulated from online competition. Many home improvement products are too large and expensive to ship, and consumers often prefer to see and feel the products at its stores. Lowe's scale also allows it to sell products at lower prices than its smaller rivals.

How fast are Amazon and Lowe's growing?

Amazon's revenue and earnings rose 20% and 14%, respectively, in fiscal 2019 (which aligns with the calendar year).

A smartphone shopping app with a shopping cart in the background.

Image source: Getty Images.

In the first quarter of 2020, which ended on March 31, its revenue rose 26%, but its earnings fell 29% due to disruptions and over $600 million in COVID-related expenses. It expects those costs to surge to over $4 billion in the second quarter.

Amazon expects its second-quarter revenue to rise 18%-28% annually, but for its operating profit to come in roughly flat -- which will likely trickle down to a net loss. Analysts expect its revenue to rise 22% for the full year, but for its earnings to dip 6%.

Lowe's net sales only rose 1% in fiscal 2019 (which ended on Jan. 31), but its earnings -- buoyed by big buybacks, the restructuring of its Canadian business, and tighter cost controls -- surged 83%.

In the first quarter of 2020, which ended on May 1, Lowe's comparable store sales rose 11.2%, its total revenue grew 11%, and its adjusted EPS rose 45%. Lowe's attributed that robust growth to strong sales of cleaning products, refrigerators, freezers, and DIY products, which all accelerated throughout the pandemic as more consumers stayed home.

Lowe's estimates that the COVID-induced shopping spree boosted its comps by 850 basis points, even as its stores cut their operating hours. An 80% jump in online sales also cushioned that blow. Lowe's withdrew its guidance for the full year, but Wall Street expects its revenue and adjusted earnings to rise 1% and 3%, respectively.

Long-term growth vs. short-term gains

Amazon currently faces more COVID-19 headwinds than Lowe's, but Lowe's growth spurt could be short-lived.

Looking further ahead, Lowe's will need to tackle three long-term challenges: tumbling new home sales amid the economic fallout of COVID-19, an aging customer base of Baby Boomers, and intense competition from Home Depot.

Amazon arguably faces fewer long-term challenges, since it comfortably dominates the e-commerce and cloud infrastructure markets. But it isn't invincible: Walmart and Target remain resilient competitors in the retail market, its dependence on third-party sellers is causing quality control issues, and AWS is growing at a slower rate than its top rival, Microsoft's Azure.

The winner: Amazon

Lowe's looks cheap at 20 times forward earnings and pays a decent forward yield of 1.8%. Amazon doesn't pay a dividend and trades at nearly 100 times forward earnings.

Lowe's might appeal to value-seeking income investors, but it generally flourishes in a growing economy instead of a shrinking one. Amazon also faces macro headwinds, but its cloud business should remain resilient (thanks to the surging use of cloud-based services and streaming platforms) and buoy its e-commerce business through the incoming storm.

Therefore, Amazon arguably deserves its premium valuation right now, and could outperform Lowe's over the next few months as the COVID-19 shutdowns send shockwaves through the U.S. economy -- which makes it the stronger overall investment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.