Nonetheless, its shares have lagged behind competitors and the overall market. Walmart's shares have gained 14.5% over the previous 12 months compared to the 41% gain of Target (TGT) shares and the 96% gain of the S&P 500 index.
Could the stock be a good value at current levels? Not necessarily, in my opinion. I think there's both a bull case and a bear case for Walmart's shares.
First, let's take a close look at the bull case. Walmart is riding the merging of offline and online sales, which accelerated during the pandemic.
"The pandemic drove innovation for Walmart's marketplace app, specifically for curbside and delivery ordering, which was enriched by first-party insights amassed from years of offline and in-store loyalty," says Brent Ramos, director of product search at Adswerve. "This drove a seamless app-based experience with masterful digital storytelling. Now that shoppers are coming back in-store to shop, the consumer path is only strengthened — and it is being felt in retail earnings. I expect the company to continue growing its digital strategy in tandem with what customers want to see, and Walmart's strong quarter is evidence of that success."
Kunal Chopra, the CEO at Kaspien (another analyst I follow) is on the same page: "With Walmart opening up the floodgates for 3Ps, it has signaled that it is serious about growth in eCommerce, more specifically wanting to give customers a wide assortment of selection that comes with more sellers on the platform," he says. "This is good news for sellers that Walmart has a large customer base and presents an opportunity for sellers to monetize the channel."
On the other hand, Walmart has a real growth problem. Quo Vadis Capital President John Zolidis thinks that the company's recent efforts to recast itself as a fintech incubator, health care provider, venture capital player and subscription service (via Walmart+) ignore the reality that all these efforts are miniature relative to the size base of the business. "We continue to believe that "alternative profit pools" and Walmart Plus are unlikely ever to be material," he says.
Meanwhile, Zolidis points to weak comp numbers in a couple of product categories, like grocery and Health and Wellness. He further thinks that Walmart's strong Q1 results are due to transitory factors like stimulus check spending, and he notes that e-commerce overall and online grocery continues to lose money many years after reaching scale.
While it's unclear which side is right, one thing is clear in my opinion:I think Walmart is a too-big player in a crowded market, which intensifies competition.
Disclosure: No positions
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