In a Cold Market, Walmart Stock Is Hot

Walmart stock - In a Cold Market, Walmart Stock Is Hot

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As the stock market has cooled in October, the stability of Walmart (NYSE:WMT) has made it a hot stock. The rally began in August after the company reported 4.5% growth in U.S. year-over-year sales . Since then, the shares are up about 8%, while the average Nasdaq stock is down 4%.

As the company prepares for its annual investor day at its Arkansas headquarters on Oct. 16, analysts have warmed to the stock, focusing on its growth in e-commerce and strategy for FlipKart, the Indian web site on which it spent $16 billion for a 77% stake in May. 

The belief is growing among analysts like Paul Trussell of Deutsche Bank that Walmart can top Amazon.Com (NASDAQ:AMZN), which I’ve likened to its Moby Dick, in online groceries.

And perhaps in other things as well.

Walmart Stock Is Aiming for Amazon

Most of the company’s recent moves seem aimed at beating Amazon at its own game or surpassing it in some way.

While Amazon has been introducing store brands, Walmart is buying existing brands like Eloquii and Bare Necessities, to go alongside previous purchases like Bonobos, Allswell and ModCloth.

While Amazon is talking about delivering an ad-supported streaming service, Walmart is doing it, through Vudu, ordering shows from MGM and preparing “shoppable” ads that take customer data and deliver clickable offers.

Amazon still leads in online grocery, but Trussell of Deutsche Bank notes that Walmart shoppers are more loyal and place bigger orders. By January, Walmart hopes to have pick-up sites convenient to 69% of U.S. households. Walmart has over one-quarter of the U.S. grocery market.

While Amazon is just talking about banking Walmart is already a primary bank for the “unbanked,” offering Bluebird cards through American Express (NYSE:AXP) and now offering to let consumers access Paypal (NASDAQ:PYPL) at customer service desks.

Where America Shops for Drugs

Walmart only has about 5% of the pharmaceutical market but it has gotten to one-quarter of the grocery business since 1988 and it now sees pharmacy as a huge opportunity.

It’s a double opportunity for Walmart, which has 2.2 million employees getting insurance and can benefit from cutting those costs, as well as increased sales from other consumers. While rival CVS Health (NYSE:CVS) is buying Aetna (NYSE:AET), Walmart has a partnership in place with Humana (NYSE:HUM).

Walmart has space in its stores to build a lot more clinics, and it has the buying power to sell generic drugs for as low as $4 per month. Whether or not it buys Humana, it recently tapped the head of that company’s health and wellness division to run its own health care efforts, and has a deal in place with Anthem (NASDAQ:ANTM), another health insurer, to get that company’s Medicare Advantage customers buying their over-the-counter products through its stores.

The Bottom Line

Ever since he became Walmart CEO in 2014, Doug McMillon has been chasing Amazon. After buying Jet.Com in 2016 he seemed to have some momentum. and since buying its stake in Flipkart, Walmart’s momentum appears to have returned.

Over the last three months, Walmart stock has even outperformed Amazon, a gain of almost 8% amidst the tech wreckage, holding strong even while Amazon has lost over 10% of its value in the last month.

Walmart will remain more than twice as large as Amazon, even if that company manages to hit its estimated 2018 sales target of $230 billion. If Walmart can keep up its current growth rate, its 2018 sales could top $520 billion.

When analysts need comfort, that size is comforting.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.

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