Amazon vs. Walmart: Which Stock Is the Better Bet in a Slowing Economy?

When times get tough, shoppers tighten their budgets—except when it comes to essentials like groceries and household goods. That’s where Amazon and Walmart shine, making both strong candidates for investors looking to ride out an economic slowdown. But here’s the twist: one stock looks undervalued, the other overvalued.

Walmart and Amazon continue to compete for cost-conscious consumers. But they offer very different investment profiles. Amazon is a tech-driven powerhouse with major exposure to artificial intelligence through its cloud business. That innovation edge, however, means it’s often grouped with Big Tech—making its stock more volatile in uncertain markets.

In contrast, Walmart is seen as a safe, reliable retailer. It’s performed well in past downturns and continues to attract investors seeking stability. The market has rewarded that perception: Walmart shares are up 6% this year, trading at a forward price-to-earnings (P/E) ratio of about 34. Meanwhile, Amazon’s stock is down nearly 20%, bringing its forward P/E down to 25.

Compared to their historical norms, these valuations tell a different story. Walmart’s average forward P/E since 2005 is about 18, making today’s valuation look expensive. Amazon’s long-term average forward P/E is a lofty 93—so by that measure, it’s now trading at a steep discount.

“It really comes down to how investors classify Amazon,” says Dan Romanoff, a senior analyst at Morningstar. “It’s lumped in with tech stocks, while Walmart is viewed as a defensive play.” That classification may be holding Amazon back—creating opportunity for long-term investors.

Amazon’s earnings are still on a growth path. Analysts expect its earnings per share (EPS) to rise from $5.53 in 2024 to $7.47 in 2026. Walmart’s EPS growth is more muted, moving from $2.51 in fiscal 2025 to $2.93 by 2027.

Yes, Amazon has faced margin pressure from massive investments in AI infrastructure like data centers. But Morningstar believes that demand will soon catch up, especially as Amazon continues to lead in e-commerce, fulfillment, and online advertising—giving it one of the strongest moats in retail.

Walmart isn’t without its own strengths. About 60% of its revenue comes from grocery sales—a stable and recession-resistant source. It’s also aggressively growing its digital sales, which are expanding at over 20% annually. Analysts see big potential for margin gains through automation and logistics improvements.

What do the analysts say? Amazon’s average price target sits at $215, with 93% of analysts rating it a “Buy.” That implies a 24% upside from recent levels. Walmart’s price target is $107, offering a potential 12.6% gain, with 86% of analysts bullish.

However, Morningstar’s valuation models suggest Amazon has even more room to run—assigning a fair value of $240 per share. Walmart, on the other hand, may be overpriced, with a fair value estimate of just $63.

Bottom line: Walmart offers defensive stability—but much of that may already be priced in. Amazon, while riskier in the short term, could offer long-term upside at a relative discount. The better pick depends on whether you’re playing it safe—or looking for a smart contrarian play.