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) --


(TGT) - Get Target Corporation Report

recently announced it would go it alone in its

online sales

efforts, cutting out partner


(AMZN) - Get, Inc. Report

, which had filled the discount chain's Web orders since 2001.

With the loss of Target, Amazon could lose $100 million in revenue, according to

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

analyst Imran Khan. Amazon might be able to expand its market share if Target's new system fails, Khan says, but the move signals trouble for the Web retailer that can't seem to reap the benefits of online sales.

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, a pioneer of


shopping, should have the best profit margins in the business, thanks to its popularity and lack of overhead. But the company's margins have lagged those of brick-and-mortar stores Target and


(WMT) - Get Walmart Inc. Report

for the past three years. As these rivals expand their Web presence, success might become more elusive for Amazon.

While Amazon employs fewer people and lacks stores, its net margin has been the same as or less than those of Wal-Mart and Target for the past three years. Amazon's net margin, a profitability measure, was 3.3% last year, even though it slashed its debt use by more than half. That compares to 3.3% and 3.4% for Wal-Mart and Target, respectively.

Amazon's operating margin, a measure of efficiency, gives a more dour view. Operating margins at Wal-Mart and Target haven't fallen below 5.6% in the past three years, and have reached as high as 8.5%. But Amazon hasn't cracked 4.5% during that time.

This discrepancy could widen as Wal-Mart and Target try to boost Web sales. Of the two, Wal-Mart's looming shadow poses a bigger threat. With pharmacies and food, Wal-Mart offers a one-stop shop that Amazon can't beat with an Internet-only presence. Customers can also pick up purchases at one of Wal-Mart's thousands of stores, saving time and money.

Amazon's stock has lost 2.5% in the past year, outperforming those of Target and Wal-Mart, whose shares have fallen more than 10%. But Target and Wal-Mart shares are much cheaper with price-to-earnings ratios of 15, compared with Amazon's bloated 56.

It's difficult to compare Amazon to other Web-only retailers because most of these companies are privately held or have stores. While


(EBAY) - Get eBay Inc. Report

offers a poor comparison because of its auction format, its stock might be an attractive alternative to Amazon shares. Last year, eBay produced a net margin of 21% and an operating margin of 24%.

Amazon will be a major player in Web commerce going forward, but its earnings can't sustain its price. Wal-Mart and Target seem like better investments at the moment.

-- Reported by David MacDougall in Boston


TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Prior to joining Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level II CFA candidate.