Stock Analysis & Ideas

Walmart Stock: A Better Bet than Amazon?

Shares of Walmart (WMT) have been holding their own rather well amid the broader market pullback. As the race to catch up to its top peer Amazon (AMZN) continues, we could witness Walmart becoming more tech-like, shedding its reputation as a brick-and-mortar behemoth.

The firm is already in the e-commerce arena, with intriguing subscription concepts such as Walmart+. As the company continues innovating, Walmart could position itself to better compete against the likes of an e-commerce stud like Amazon. Still, it may not be hard to close the gap, given the ridiculously deep pockets boasted by the top e-commerce firm.

Walmart Outpaces Amazon Stock: How Long Will It Last?

Recently, Amazon clocked in some pretty terrible numbers, which sent the stock into a tailspin.

Though Amazon may have gotten a bit ahead of itself with its warehouse expansion, “Buy with Prime” seems like it could be the next big, intriguing feature that could alleviate recent pressures and perhaps grow into its next big revenue-driving service.

The real question is whether Buy with Prime is the beginning of Amazon’s next big revenue-driving service or if it’s merely a make-up effort for its over-investment in its capacity. I think it’s the former. Amazon’s a massive disruptor, and Buy with Prime holds tremendous disruptive potential as the firm opens up its logistics to a broader range of clients. For now, Amazon’s excess capacity is working against it, and the guide is not promising.

While the fading macro environment could also weigh on Walmart, it’s the defensive grocery business and its ability to absorb higher costs that should keep WMT stock buoyed as we approach a potential recession. Inflation has been surging uncontrollably in recent quarters. Still, Walmart is one of few firms with enough purchasing power to save its consumers from the heartache of sticker shock.

As consumers move towards brick-and-mortar and bulk purchases to save money amid inflationary times, Walmart looks to be in a great spot versus Amazon.

As inflation and stagnant economic growth strike, consumers will care more about saving money than convenience. That means more bulk buying in physical stores over online purchases.

Eventually, tides will turn in favor of e-commerce over brick-and-mortar again. Still, for now, Walmart is in great shape versus the likes of its top rival, Amazon.

Walmart: Great Opportunity to Onramp Shoppers to its Digital Offering

Indeed, Walmart still has a ways to go with its e-commerce platform to catch up to Amazon.

As the tides turn in favor of brick-and-mortar stores (thanks in part to the economic reopening and pursuit of bulk purchases to save money), Walmart will have a chance to take a bit of share in the retail space. It’s virtually impossible to stay competitive against Walmart on the pricing front, especially for bulk buyers.

Walmart is likely to be a long-term inflation and recession beneficiary, but eventually, the tides will move back in favor of e-commerce. Fortunately, Walmart will be able to onramp the many loyal customers it had saved plenty of money into the digital realm.

Walmart+ is an intriguing service that could prove sticky through good times and bad. Recently, Walmart upped the fuel discount for its Walmart+ members, allowing them to receive an extra 10 cents per gallon at select gas stations. Given the surging price of fuel, such a service now looks to pay itself off.

Once the economy is ready to roar higher again, many Walmart shoppers will be sticking in the Walmart ecosystem. If Walmart can make the right investments to further enhance its digital offering, Amazon could have a serious rival on its hands.

Walmart: The Tech Company?

Walmart is no Amazon, but it has taken steps to evolve in the digital age. The hiring of PayPal’s (PYPL) CFO is a step in the right direction. Moving ahead, I’d look for Walmart to win over more tech-savvy talent as it looks to incorporate more innovation into its business.

For now, Walmart is a physical commerce story with an intriguing e-commerce platform. While the addition of PayPal CFO does not indicate Walmart’s move into fintech, I wouldn’t at all be surprised if Walmart+ grows to become more Prime-like over time.

Yes, it’s far-fetched to think about a Walmart streaming service or a video-game platform. Nonetheless, it’s these such services that are key to an incredibly sticky service. For now, look for Walmart to replicate all the things that Amazon had done right with Prime.

Wall Street’s Take

Turning to Wall Street, WMT stock comes in as a Moderate Buy. Out of 21 analyst ratings, there are 15 Buy recommendations and six Hold recommendations.

The average Walmart price target is $164.05, implying upside potential of 6.4%. Analyst price targets range from a low of $136.00 per share to a high of $185.00 per share.

The Bottom Line on WMT Stock

Walmart stock is finally seeing the tides move in its favor. If we’ve going to fall into a recession, Walmart may continue outpacing Amazon. Though Walmart is becoming more tech-savvy, it seems doubtful that the company can catch up to Amazon on the tech front.

At the end of the day, Walmart is playing catch-up. Amazon is already skating to where the puck is headed next. Though Amazon’s physical push has been lackluster, I’d look for the company to better leverage Whole Foods to clash with Walmart and other retailers in the physical realm.

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