Walmart Faces Investor Scrutiny Over $2.3 Billion Vizio Purchase

Walmart (NYSE: WMT) ranks among the largest retailers globally, thriving with its box stores, Sam’s Club locations, and various grocery outlets. However, not all of its investments guarantee success. Of particular interest is Walmart’s recent $2.3 billion acquisition of Vizio, a move that warrants close attention from investors.

Walmart’s Past Acquisitions and Market Strategy

Walmart has a history of significant acquisitions, with Jet.com being one of the most prominent. This deal, worth approximately $3.3 billion, occurred in 2016 as Walmart aimed to enhance its online competitiveness against Amazon.com (NASDAQ: AMZN). Although the Jet.com acquisition was relatively recent, the market dynamics have shifted drastically since then.

At the time, Walmart’s online performance lagged, while Amazon was beginning its ascent to market dominance. In a statement about the Jet.com acquisition, Walmart noted:

This acquisition will build on and complement the significant foundation already in place to serve customers across the Walmart app, site, and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.

The essence of that statement underscored the intent to maintain distinct brands, with Walmart.com focusing on the company’s Everyday Low Price strategy and Jet.com providing a curated shopping experience.

However, by 2020, just four years post-acquisition, Walmart shut down the Jet.com platform. Although management praised the deal for bolstering online sales, it ultimately did not yield a favorable return on investment for the company.

Analyzing the Vizio Acquisition’s Impact on Walmart

Turning to the recent Vizio acquisition, Vizio, a manufacturer of electronics, has recently ventured into the advertising technology space. This $2.3 billion investment aligns with Walmart’s new growth strategy in advertising. Given Walmart’s current market cap of over $700 billion, this move does not seem overly extravagant.

Nevertheless, Walmart has not detailed how Vizio’s technology will integrate into its existing operations. During the fourth quarter 2024 earnings call, Walmart CFO John David Rainey stated:

We’re also excited about the addition of VIZIO and its SmartCast operating system to our portfolio of advertising capabilities. VIZIO will help us serve customers in new ways to enhance their shopping journeys while also creating new opportunities for advertisers to connect with customers and boost product discovery, empowering brands to realize greater impact from their advertising spend with Walmart.

When asked for clarification by an analyst, the U.S. division head remarked:

The operating system in VIZIO is an impressive operating system. It works with very little friction. It’s easy to set up and install. I have several of these personally, and I’ve acquired more since we started talking about this acquisition.

I’m just really pleased with the way it works for the Walmart Connect business to have more ways to distribute advertising for sellers and suppliers; that’s really exciting for them. We hope to be able to do that in a very efficient way. So, we’re starting the process of integration. And over this next year, we’ll be working on bigger plans for the brand as the teams get more time to work together.

These statements, however, lack depth on how Walmart intends to leverage Vizio’s software. It seems the purchase is based on potential benefits rather than a clear strategic plan. Given the past challenges with Jet.com, investors may want to approach this acquisition cautiously, considering Walmart’s core business remains retail, not advertising. Previous attempts at diversifying into areas like finance have not yielded significant returns either.

Walmart’s Financial Resilience and Future Outlook

Walmart’s vast scale means that a potential financial misstep with the Vizio acquisition may not dramatically impact the company. Yet, squandering investor funds or pursuing unfruitful ventures can send negative signals about Walmart’s growth strategy. While the company’s core operations are unlikely to suffer significantly because of Vizio, there might be a broader implication that Walmart could reevaluate its approach to growth investments.

Final Thoughts on Investment Opportunities

For investors who feel they may have missed out on opportunities with leading stocks, now is the time to reconsider their strategies. The market occasionally presents rare opportunities that can yield substantial returns.

Continue »

*Stock Advisor returns as of April 5, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.