Please ensure Javascript is enabled for purposes of website accessibility

Amazon's Holiday Hurrah Fades

By Rich Duprey - Updated Apr 5, 2017 at 7:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The e-tailer bucked the season's sales trend, but where can it go from here?

We've known for some time that the malls are ghost towns and retail is dying, if not already dead. Still, I had no intention of braving the traffic or battling for parking to do my Christmas shopping. There might not be as many sharp elbows in the aisles these days, but gridlock still reigns supreme outside.

I planned to do most of my shopping online. While I've bought progressively more items over the Internet each year, this Christmas I planned to do virtually all of it, well, virtually.

Which means there was only one "store" I really considered: (NASDAQ:AMZN). Breadth of selection, reliability, security, price, and fast shipping made the choice easy. Whether I chose Amazon's own products or those of its partners, I was able to substantially complete my shopping in one day from the comfort of my dining room table.

I did all of my buying the week before Christmas (and still got everything delivered by the 24th), but it looks like I was outside the norm: The e-tailer reported Dec. 15 as its biggest-selling day of the year, and it once again set new records. Orders rose 17% to 6.3 million items, while shipments rose to 5.6 million units, up 44% from the year before.

Not surprisingly, the Nintendo Wii was among its top-selling products, as were EyeClops night vision goggles from JAKKS Pacific (NASDAQ:JAKK). High-def TVs from Samsung led the electronics categories, which might surprise some, as Corning (NYSE:GLW) recently conceded defeat. The 8-gig iPod Touch from Apple (NASDAQ:AAPL) was also a top dog, not surprising considering the symbiotic relationship between the two through the new App Store program that allows shoppers to browse Amazon's virtual aisles.

Yet that seems to conflict with the numbers my colleague Rick Munarriz recently highlighted showing that e-tail is dead, with comScore reporting that e-commerce sales between Nov. 1 and Dec. 21 fell 1% from last year. MasterCard (NYSE:MA) followed that up with a SpendingPulse report that tracked sales up until the 24th and found they fell 2.3% from the 2007 holiday shopping season.

So how do we account for Amazon's numbers? It is the exception that proves the rule, but that doesn't mean it will be an investment that proves to be exceptional. Although shares are some 10% below where they were at the beginning of November and almost 50% below their 52-week high, they've also risen 30% since nearly hitting their 52-week low just days before Thanksgiving. At current prices, Amazon now trades at 37 times this year's projected earnings. That's more than twice the valuation the market is assigning to bricks-and-mortar retailer Wal-Mart (NYSE:WMT), notably one of the winners in this recession.

I like as a shopping destination, but this is the peak for now. The Christmas season is its high point; I think it can only be downhill from here, particularly given economic conditions. I think Wal-Mart offers a more compelling valuation, and it's a retailer that can continue to prosper even if the recession deepens. Like an after-holiday discount, I'd wait for Amazon to go on sale again.

Stock news, financial commentary, and your daily dose of Foolishness: Get plugged into The Motley Fool on Twitter!

Wal-Mart Stores is a Motley Fool Inside Value selection. and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey owns shares of JAKKS Pacific and Wal-Mart, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$140.64 (-1.44%) $-2.05
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$129.82 (0.96%) $1.24
Apple Inc. Stock Quote
Apple Inc.
$168.49 (-0.44%) $0.75
JAKKS Pacific, Inc. Stock Quote
JAKKS Pacific, Inc.
$21.61 (-0.41%) $0.09
Mastercard Incorporated Stock Quote
Mastercard Incorporated
$350.58 (-0.79%) $-2.80
Corning Incorporated Stock Quote
Corning Incorporated
$37.14 (0.92%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.