While the S&P 500 is down about 3% for the year, Walmart (NYSE:WMT) is beating the market with a gain of 6%.
The stock has more upside due to growing e-commerce business.
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%.
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.