Walmart Stock Is Up Big. Here’s Why It Could Beat Amazon

July 7, 2020 6:48 PM UTC
Walmart's e-commerce business has surged during the pandemic. The retailer is trying to beat Amazon by launching a subscription-based program.
  • Walmart’s online sales have surged during the pandemic as stores shut down.
  • The retail giant’s stock has considerable upside due to its e-commerce business.
  • Walmart is competing with Amazon Prime by launching its subscription-based service.

While the S&P 500 is down about 3% for the year, Walmart (NYSE:WMT) is beating the market with a gain of 6%.

While the S&P 500 is still in the red year-to-date, Walmart stock has gained 6%. | Source: Yahoo Finance

The stock has more upside due to growing e-commerce business.

The Retailer Is Having Strong Sales And Profit Growth

While many brick-and-mortar stores are going bankrupt or are closing because of the pandemic, Walmart is well-positioned to thrive in the changing retail environment.

Retail closings should help the company gain sizable market share, boosting earnings in 2021 and beyond. Walmart’s $21.5 billion U.S. e-commerce business is increasing, giving the company a competitive edge.

The giant retailer experienced 37% growth in online sales this past year, exceeding its growth target of 35%. Online sales jumped 74% in the first fiscal quarter ending April 30, as the pandemic prompted more customers to shop online for essentials.

U.S. revenues increased 10% to $89 billion. Same-store sales rose by approximately the same percentage points.

Walmart’s stock received a boost in June after being upgraded by UBS. Analyst Michael Lasser raised his rating on Walmart from Hold to Buy and lifted his price target from $130 to $135. That’s a nearly 10% gain from the current stock price.

Lasser claims that increased online sales and healthy profits give WMT ample room to continue rising:

Our thesis is that Walmart is entering an era of amplified earnings growth driven by an enhanced productivity loop, increased e-commerce scale, and accelerated technology deployment.

These three factors should allow the retail giant to achieve earnings per share of more than $6 in fiscal 2023 compared to consensus EPS estimates of $5.80.

Lasser also sees many sources of additional upside for the company as it gains traction in healthcare and advertising, and has success in key markets like India:

Besides, WMT offers the prospect of best-in-class consistency in an uncertain environment. We believe these elements will enable WMT’s shares to maintain a premium multiple, especially as the gap between the leaders and laggards in retail widens.

U.S. e-commerce activity could experience 25% growth, as well as EBIT growth of up to 8%.

Walmart Is Competing With Amazon

Amazon (NASDAQ:AMZN) is a big rival to Walmart. On Tuesday, Walmart announced it would launch Walmart+ later this month.

The subscription-based program will directly compete with Amazon Prime.

The service will cost $98 annually and include same-day delivery of groceries and other items; it will also come with fuel discounts at Walmart gas stations. It’s cheaper than Amazon Prime, which costs $119 each year.

Walmart has also partnered with e-commerce giant Shopify (NYSE:SHOP) to expand its third-party marketplace and take advantage of the pandemic-fueled surge in online shopping.

With these moves in place, Walmart is becoming a threat to Amazon’s continued dominance.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author owns shares of Walmart (WMT).

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

Show comments