For a long time, the narrative in retail was dominated by the Amazon (NASDAQ:AMZN) apocalypse, where countless retailers were losing significant market share to the rapidly growing Amazon.com e-commerce machine. Then, that narrative changed, mostly because Walmart (NYSE:WMT) started fighting back with enhanced omni- and digital channel operations, and Wall Street started looking at the retail landscape as a two-horse race between Amazon and Walmart.

But now that narrative needs to change again. This isn’t a two-horse race. It’s a three-horse race. Target (NYSE:TGT) has inserted its name back into the fold thanks to enhanced omni- and digital-channel operations that are driving better growth than either WMT or AMZN. Case in point: Target has out-comped Walmart for five consecutive quarters, while Target’s digital business has outgrown Amazon’s digital business for ten consecutive quarters.

As such, it is becoming increasingly apparent that the debate in retail is no longer Amazon versus Walmart. It now includes Target stock in the mix.

In this article, we will examine one leg of this new three-way competition: Amazon versus Target. Which stock is the better buy?

In the big picture, both Target stock and Amazon stock are strong buys. You want to buy Target stock here because this is a resurgent growth story converging on a discounted valuation, a dynamic that will ultimately lead to healthy share price gains. You also want to buy Amazon stock here because, while the e-commerce business is slowing, other higher-margin businesses are ramping, and that will create a profit surge over the next several years that will power Amazon stock higher.

Overall, you should consider buying both Target stock and Amazon stock. Here’s a deeper look at why.

Why Is Target Stock a Buy?

There are two big reasons to buy Target stock at the current moment. One, the company is on a tear, and projects to remain red hot thanks to multiple omni-channel growth initiatives rolling out at a time when the consumer is still healthy. Two, TGT stock still isn’t priced for big growth to continue, so as it does, the stock will benefit from a double tailwind in profit growth and multiple expansion.

On the first point, Target has been on fire lately. As stated earlier, the company has out-comped Walmart for five straight quarters. That includes a red hot 5.3% comp last quarter to wrap up the best full-year comp Target has reported in over a decade.

The drivers behind this resurgent growth are multi-faceted. First and foremost, you have a red-hot digital business that has consistently grown at a 20%-plus rate for the past two-plus years, and which has significantly outgrown AMZN’s e-commerce business during that stretch, too. Also, Target has rolled out more omni-channel initiatives like Drive Up, expanded more aggressively into things like grocery and doubled down on expanding its portfolio of exclusive brands. The sum of these initiatives has naturally driven traffic and transaction prices higher.

This success will continue. The digital business is still relatively small in the big scope of things. Drive Up is only available at just over half of all Target locations. Grocery still isn’t a huge part of the business. And, importantly, the U.S. consumer remains healthy, with wages on the rise and confidence coming back into the picture.

On the second point, Target stock trades at just 13X forward earnings. That is below the market average 16X forward multiple, meaning Target stock is relatively discounted. It shouldn’t be. This company is firing on all cylinders right now. The stock consequently deserves a market average multiple. As such, if the company continues to fire on all cylinders throughout 2019, then Target stock will naturally rise.

Why Is Amazon Stock a Buy?

There are also two big reasons to buy Amazon stock now. One, this is still the biggest growth story in the market with exposure to (and often dominance in) all of tomorrow’s most important markets. Two, while the low margin e-commerce business is slowing, other high-margin businesses are ramping, and that’s a great sign for the profit growth trajectory over the next several years.

On the first point, this is still Amazon. By that, I mean this is still the company behind the world’s largest e-commerce business by a mile, and the world’s biggest cloud business by a mile. It’s also the company with a commanding lead in the voice assistant market, and a growing presence in the broader smart home market. Plus, Amazon is also behind one of the world’s fastest-growing digital ad businesses, has a healthy and expanding presence in media streaming, is developing a formidable offline footprint and is only a few steps away from creating huge pharmacy and logistics businesses.

In other words, Amazon has its fingertips everywhere that matters. In most of those markets, Amazon is also either the leader, the fastest grower or projects to be huge. Until this is no longer true, Amazon stock is a long-term buy-and-hold.

On the second point, Amazon’s profits are gearing up for an unprecedented surge over the next several years. Why? Because the e-commerce business is slowing. That may seem like a bad thing. But, the e-commerce business is low margin. As such, a slowdown there isn’t horrendous. Meanwhile, the digital ad business is ramping, and that’s a high-margin business. Plus, cloud is still growing rapidly, and that’s also a high-margin business.

As such, over the next several years, a majority of Amazon’s growth will be driven by high-margin revenue streams. That will bring the company’s overall profitability profile higher, and cause profits to surge. A surge in profits is the exact catalyst Amazon stock needs to stay on a winning trajectory.

Bottom Line on TGT vs AMZN

When it comes to the debate of Target versus Amazon, it’s best to call it a tie. Target is winning in the e-commerce realm, but Amazon is much more than an e-commerce company, and is winning in all other markets that it has exposure to. As such, the best thing to do here is to buy both Target stock and Amazon stock. Both of these stocks will continue to rise for the foreseeable future.

As of this writing, Luke Lango was long AMZN and TGT.