Can Walmart's New Bundled Subscription Beat Amazon?
Key Points
Walmart's e-commerce and membership growth numbers were strong in the company's latest quarter.
Shares of Walmart trade at a premium compared to peers, and it's approaching a $1 trillion market value.
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Walmart (NASDAQ: WMT) is offering a bundled subscription deal that could knock Amazon's (NASDAQ: AMZN) Prime membership off its pedestal. Earlier this week, the company announced a combined Walmart+ and Sam's Club Plus membership for just $120 per year. That's $100 less than the two programs priced separately, and $19 less than Amazon Prime's $139 cost.
The bundle includes free delivery, 2% Sam's Cash on select purchases, $0.10 off per gallon of gas, and a choice between Peacock and Paramount+ streaming, among other perks. The catch is that it is only available as an annual subscription, and there's no free trial or monthly option available at this time.
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Memberships have proven to be lucrative revenue channels for companies like Walmart and Amazon. Shoppers tend to spend significantly more with the merchant when they have a membership, roughly four times as much as non-members in Walmart's case.
So can Walmart's new subscription bundle dethrone Amazon Prime? Probably not. Amazon Prime is so deeply entrenched at this point that the mix of streaming, fast shipping, and ubiquity among consumers is almost immovable. However, Walmart doesn't have to beat Amazon to succeed. This is what investors should focus on.
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This particular offering strengthens Walmart's flywheel and advertising business. Walmart stock trades at a hefty premium, leaving little room for stumbles this holiday season. Some investors may want to wait for a better entry point. Still, overall, Walmart is an incredibly strong business that just created a new product that will help solidify and deepen customer engagement.
Shares of Walmart have risen nearly 6% year to date as of this writing. The stock is trading at roughly 40 times both forward and trailing earnings. The company's e-commerce segment continues to grow substantially, increasing 23% in the fiscal 2027 second quarter. Walmart's membership growth was also impressive at 17%.
Whether it overtakes Amazon or not, Walmart is a worthy investment.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
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