Retail stocks are drawing investor attention as trends in e-commerce, grocery and pet care reshape the sector. Analysts point to new growth opportunities in both online and physical markets.
BNN Bloomberg spoke with Arun Sundaram, equity analyst at CFRA, about why Amazon, Walmart and Chewy stand out, highlighting catalysts ranging from cloud growth to margin expansion and pet health services.
Key Takeaways
- Amazon’s growth is driven by e-commerce, rapid advertising expansion and its leading cloud business.
- AWS could accelerate with higher capital spending, a strong backlog and AI partnerships.
- Walmart’s e-commerce business has turned profitable, improving its margin outlook.
- Sam’s Club and international operations provide additional growth potential.
- Chewy is diversifying into healthcare, insurance and vet clinics, supported by a strong balance sheet.
Read the full transcript below:
ANDREW: Hot picks today — we’re looking at retail. We are joined by Arun Sundaram, equity analyst at CFRA. Arun, thank you for joining us. Let’s start with Amazon. We hear so much about their cloud business, AWS, but you think investors should also pay attention to Prime Days. Why is that important?
ARUN: Thanks for having me. Amazon is uniquely positioned, because it’s not just the industry leader in e-commerce, but also in cloud computing with AWS. On top of that, it has a large and rapidly growing advertising business. Combined, these three businesses give Amazon one of the largest addressable markets compared with any other retailer or tech company we cover.
With its e-commerce business, Amazon Prime and Prime Day are important drivers. The upcoming Prime Day is next week, and those events are typically strong for Amazon. They also set the stage for holiday sales. All three of its businesses — e-commerce, advertising and cloud computing — are showing positive momentum right now, which is why we’re bullish on the stock.
ANDREW: The stock has underperformed this year. What has held it back relative to the other “Magnificent Seven” names?
ARUN: The stock really moves on AWS. While Amazon is the industry leader in cloud computing, AWS growth has been steady at about 17 per cent over the last few quarters. That growth hasn’t accelerated, unlike at Google and Microsoft, which have seen their cloud units pick up speed.
In our view, AWS growth could accelerate next year. Capital spending is up sharply, with more than US$110 billion going into AWS. Amazon also has a large backlog in cloud services and a partnership with AI company Anthropic, which is using Amazon’s chips and models. We think those factors could lift AWS growth above 20 per cent next year and move the stock higher.
ANDREW: Let’s move to Walmart, another big retail name.
ARUN: Walmart is one of the largest brick-and-mortar retailers, but what we like most is its e-commerce business. Walmart U.S. e-commerce is growing 20 to 25 per cent year over year, and that business just turned profitable this year.
For years, e-commerce at Walmart was unprofitable. Now that margins have flipped, we think they could eventually match in-store margins, improving Walmart’s overall profile. With about US$700 billion in annual revenue, even a modest expansion in operating margins could generate significant profit growth.
ANDREW: Roughly how much of Walmart’s sales are in the U.S. versus international markets?
ARUN: The majority — around 60 to 70 per cent — is in the United States. The rest comes from Walmart International and Sam’s Club. All three businesses are growing, and we think Sam’s Club, in particular, is underappreciated as it continues to expand.
ANDREW: Finally, let’s talk about Chewy, the pet products retailer.
ARUN: The “humanization” of pets has been a trend for over a decade, and it has benefited the pet industry and Chewy. The company isn’t just about pet food and supplies — it has expanded into pharmaceuticals, pet health and prescription drugs. It’s also preparing to launch brick-and-mortar vet clinics.
Chewy has added new verticals like online advertising, pet insurance and the Chewy+ subscription program. About 80 per cent of sales come from autoship, giving it a recurring revenue base. It also recently launched fresh food, which is a fast-growing, higher-margin category. International expansion is underway, with a Canadian launch last year.
On top of that, Chewy has a solid balance sheet, no long-term debt, ongoing share buybacks and strong cash flow. For all those reasons, we maintain a buy rating on the stock.
ANDREW: Arun, thank you very much.
ARUN: Thank you.
ANDREW: Arun Sundaram, equity analyst at CFRA.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AMZN NASDAQ | N | N | N |
| WMT NYSE | N | N | N |
| CHWY NYSE | N | N | N |
---
This BNN Bloomberg summary and transcript of the Oct. 3, 2025 interview with Arun Sundaram are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
