Broken Moats
Family-Office Long/Short Research, Variant Perception
Target's EBITDA multiple should not keep expanding when the backdrop is hurting its business on net while comparable companies retrench. The multiple is nearing Amazon's, yet almost no one would plausibly own Target over Amazon for any real length of time. Per @valuedrift, low multiples protect and high multiples leave a stock vulnerable. x.com
Target's push near its highs during an affordability shock looks counterintuitive, since it is pure discretionary, not a staple or safety play. Beyond the recessionary pull of higher energy costs, rising resin and plastic costs and skyrocketing freight rates should pressure margins later in the year. It has big home exposure as rates back up, and a new boycott by a 1.8-million-member teachers federation is not insignificant. Walmart, with groceries, is a staple, and TJX more so than Target. x.com x.com x.com
Amazon's weak retail growth has shaken the earlier buy case. Online-store sales rose just 2% year over year, and the retail numbers look so poor that it is no longer clear at what price the shares are a buy. x.com x.com x.com
Amazon looks cheap against its growth and cash-generating businesses. At about 3.5 times trailing revenue and a roughly 20 trailing P/E, it has $776B in sales, AWS growing 37% year over year, plus advertising and marketplace cash engines. x.com
Target looks appealing after fixing its inventory problems and returning to sales growth, while remaining far cheaper than its rival. It spent about four years on the inventory repair and cut prices on more than 10,000 products. x.com
Amazon looks cheap against its expected long-term earnings growth if that growth proves accurate. Its five-year consensus growth is the fastest in the Magnificent 7 after Nvidia, while its 0.90 forward P/E-to-growth ratio is the lowest excluding Nvidia. x.com x.com
Walmart's valuation is too high for a grocery and household retailer. At about 36 times next year's earnings, it exceeds its five-year norm of 25 and the roughly 20 times this business should command; Target trades near 16 times. Stay away from Walmart here. x.com
Target's real value lies in its real estate, much like McDonald's, so the bankruptcy thesis from @porterstansb misses it. Plenty of capital can be unlocked from its roughly 1,550 owned stores through sale-leasebacks, which the balance sheet reveals. x.com
Amazon is a cash cow trading at a lean multiple, while CEO Andy Jassy says AWS is booming. x.com
Amazon looks increasingly attractive at about 16x operating cash flow, well below its 10-year median of about 22x. x.com
Amazon looks attractive because AWS is growing 36% year over year while being less exposed to OpenAI and Anthropic than peers. That combination offers strong growth with less single-lab risk, yet Amazon trades near its lowest valuation ever. x.com
Amazon is one of the market's great opportunity-cost traps. After its earnings and historic capex spending, the stock risks moving sideways for a long period, locking up capital that could earn much better returns elsewhere. x.com
