Walmart (WMT) has jumped 16% YTD to top the S&P 500 and it could break out to new highs if its Q1 results and guidance impresses Wall Street on May 16.
The company is revamping its business and expanding newer profit-heavy revenue streams.
The Bull Case
Walmart is a one-stop-shop powerhouse thriving amid challenges from Amazon (AMZN) and Target (TGT). Walmart offers every form of delivery and pick-up possible and its subscription service is helping keep customers loyal.
The country’s largest grocer is rolling out a new premium food brand called Bettergoods, aiming to attract newer higher-income shoppers and compete against popular store brands at Target and Trader Joe’s. Walmart also has partnerships with digital native retailers and a third-party marketplace.
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On top of that, it is growing its advertising segment as more customers start their shopping searches on Walamart.com. The firm is attempting to expand its booming digital ad segment through its planned acquisition of TV maker VIZIO as the streaming world becomes a battleground for ad dollars.
Walmart is innovating and pushing forward into new tech-focused and automation frontiers at its warehouses, stores, and beyond to compete alongside Amazon and increase profitably. Speaking of, Walmart said in late April that it was leaving the healthcare business just five years after entering the market, closing all 51 of its health centers and shuttering its telehealth business.
Other Fundamentals
Walmart averaged 4.8% sales growth over the past five years, including 6% and 6.7% in the trailing two years. The success showcased WMT’s ability to thrive during the Covid shopping boom and a more normalized economy that saw consumers revert back to essentials. WMT’s last five years stand in contrast to rival Target, which suffered greatly as shopping habits changed.
Walmart is projected to grow its revenue by 3.8% in its FY25 and then jump 4% higher next year to reach $699.60 billion (adding $50 billion to the top-line vs. last year)—which would roughly match Amazon.
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WMT’s adjusted EPS are projected to climb by 6% and 8%, respectively and its most accurate/recent EPS estimates are above expectations.
WMT stock has climbed 20% in the last two years to destroy Target’s 25% downturn. Walmart has climbed roughly 80% during the last five years to match the S&P 500 and nearly double the Zacks Retail sector.
Walmart trades 7% below its average Zacks price target and it is back above its 21-day and 50-day while sitting at neutral RSI levels.
Walmart trades at a 7% discount to its highs at 25.2X forward earnings and somewhat in line with its Zacks sector’s 22.4X. WMT’s $60 a share price tag (after its 3-for-1 split in February) might make the stock more attractive to some investors.
Bottom Line
Walmart is a proven retail titan adapting for the future across multiple areas. WMT is also a dividend payer able to succeed in nearly every economic environment.
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