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Analyst: Wal-Mart shipping no big threat to Amazon

Caris & Co. analyst Scott Tilghman said in a research note Wednesday that Wal-Mart Stores Inc.'s recently announced plans for same-day shipping is not the threat to Amazon.com Inc. that some perceived it to be.

THE BACKGROUND: Wal-Mart said Tuesday that it is testing same-day delivery service in select markets for customers who buy popular items online during the holiday shopping season. The tests are already underway in northern Virginia, Philadelphia and Minneapolis. The company plans to begin testing the service in San Francisco and San Jose, Calif., later this month or early November.

THE ANALYSIS: While this may seem like a direct threat to Amazon, Tilghman says it poses little risk to the Seattle company. Wal-Mart's program offers fewer products and is being offered in five markets, versus the 10 being tested by Amazon.

The biggest issue, Tilghman says, is that Wal-Mart and Amazon go after a very different base of customers.

Wal-Mart's customers typically have household incomes below the nation's average, while Amazon customers are typically well above. Tilghman said that Wal-Mart sees about half of its online orders being picked up in stores so that shoppers can pay cash. Because of this, Tilghman estimates that few of Wal-Mart's customers will be able or willing to pay for the fees associated with same-day service and its offerings aren't strong enough to woo Amazon shoppers away.

Tilghman has a $259 price target on Amazon's shares

THE STOCK: Amazon's shares fell 3 percent on Tuesday following the news. It dropped another $6, or 2.4 percent, to $244.96 in afternoon Wednesday. Its stock has traded between $166.97 and $264.11 in the past 52 weeks.