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Stock Analysis & Ideas

AMZN Forecast Does Not Edge Out Walmart

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I am bullish on Walmart (NYSE: WMT). Walmart’s financial chief, Brett Biggs, has made a surprising announcement. He announced that the company hasn’t seen any early holiday shoppers this year. It is weighing down sentiment for WMT stock.

It is a shame considering the history of the business and its strong outlook. Walmart has a leg up on competitors this year because it’s likely that it’ll be able to offer customers what they need when their favorite items sell out.

Therefore, the retail juggernaut is in a prime position to succeed. It is just coming off a great quarter. Plus, the international market is progressing at a decent clip.

Compared to some of the major hyper-growth stocks out there like Tesla (TSLA) and Nvidia (NVDA), Walmart often gets lost in the shuffle. For value investors, that is a good thing. It means shares of this solid company are available at a huge discount compared to its peers. During the holiday season, the company is forecast to dominate retail sales.

The AMZN forecast is also positive. It’s the “800-pound gorilla” in the room. However, WMT is available at a higher discount and upside. Income investors will also value it higher due to continuously growing upcoming dividends.

WMT vs. AMZN Forecast

For retail companies, the fourth quarter is always a bonanza. The final week of holiday shopping is in full swing, with retailers preparing for a wild ride. It is a breath of fresh air for companies like Walmart and Amazon.

Amazon (AMZN) is dominating the online shopping world. Shoppers paid $610 billion to Amazon during the trailing twelve months to June 2021. Walmart earned $566 billion during the same period. Hence, JP Morgan is confident Amazon will become the No. 1 retailer in America next year.

Nevertheless, Walmart is still a very robust enterprise. Additionally, Amazon could become even more vulnerable to antitrust measures by exceeding Walmart in terms of revenue than ever.

It is also important to put things into context. Amazon is unstoppable at this point. Consequently, most companies are feeling the pinch. It is the same feeling media companies feel when they look at Netflix (NFLX). On its own, Walmart is a behemoth in the retail industry, and it doesn’t plan on stopping anytime soon.

Quarterly Earnings Repose Confidence

Walmart’s third-quarter earnings surpassed analysts’ expectations by a mile. The retailer reported better-than-expected numbers, with price-sensitive shoppers flocking to its stores as the grocery industry continues seeing rising costs for household staples.

The best thing for Walmart coming out of earnings season is the robustness of its supply chain. The retailer also charters its own ships, so there are no hiccups in supply. Therefore, Walmart stands amongst a select few companies effectively managing the current supply chain crisis.

Walmart CEO Doug McMillon reaffirmed this sentiment. Inventory for the U.S. is up 11.5% in anticipation of the busy holiday season. Hence, the chances of running out of inventory are slim. The retailer has been preparing for the holidays early and prioritizes key products on ships.

In light of this impressive performance, Walmart upped its guidance. The retailer now forecasts adjusted earnings per share of approximately $6.40 for the year. Previously, the company was forecasting earnings in the range of $6.20 to $6.35.

Walmart Dividends

Walmart is a company that has been paying and growing its dividend since 1974, making it worthy of any income investor. The retailer is always at the top of the list whenever income investors look for upcoming dividends.

Walmart, a Dividend Aristocrat and two years from becoming the next Dividend King, has an enticing dividend yield of 1.58%. A Dividend Aristocrat is an S&P 500 company paying and hiking its base dividend for a minimum of 25 consecutive years.

Wall Street’s Take

Wall Street is betting big on Walmart. On TipRanks, 18 Wall Street analysts offer 12-month price targets for Walmart. The big-box retailer carries a Strong Buy consensus based on 15 Buy ratings, three Hold ratings, and zero Sell ratings assigned in the past three months.

The 12-month Walmart price target is $172.11 on TipRanks, implying an upside of 21%.

AMZN Forecast Not Enough to Edge Walmart

The holiday season is like a World Series, Superbowl, and Stanley Cup for retailers. Amazon and Walmart are the two biggest e-commerce retailers on the planet. Naturally, they both will rake in billions.

Walmart’s revenue in 2021 is expected to be $559 billion. Still, its e-commerce sales only represent 13.4% of that total which means the majority comes from traditional brick-and-mortar stores like Walmart locations across America. That will irk investors, especially since the e-commerce trend is secular.

However, Amazon is not without its struggles. It’s not surprising that the e-commerce giant recently reported an even sharper-than-expected drop in earnings, as it was hit hard by supply chain issues and had its staff stretched thin. Hence, the rosy AMZN forecast needs to be put into context.

Due to a combination of dividends, robust outlook, and solid fundamentals, Walmart is a stable investment for any portfolio.

Disclosure: At the time of publication, Faizan Farooque did not have a position in any securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates.  Read full disclaimer >

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