If you chose one blue-chip, tried-and-true stock to help get you through the novel coronavirus, Walmart (NYSE:WMT) stock would have been a pretty good choice.
But now we’re deep in the pandemic. Most of America has been living under social distancing rules for a few weeks. So how does WMT stock stack up for the longer term?
Is it worth it to take a new position in Walmart stock now? Or is the stock artificially inflated by panic buying? Is it a bubble ready to pop in a depressed market?
Let’s take a closer look at the biggest retail company in the United States.
WMT Stock at a Glance
Walmart is trading just north of $120 per share, which is up 5.4% year-to-date. That’s an extraordinary return considering the Dow Jones Industrial Average is down 17% in 2020.
In fact, WMT stock is close to its 52-week and all-time high of $128, which may convince skeptics that it doesn’t have a lot of room to run.
If you want a big name in the retail space, Walmart’s your pick. With $387.7 billion in sales in 2018, WMT does more than three times the business as its nearest competitor, Amazon (NASDAQ:AMZN) and is even further ahead of grocery giants Kroger (NYSE:KR) and Costco (NASDAQ:COST).
Those mammoth sales figures helped Walmart record $514.4 billion in revenue in 2019, an increase of 2.8% over 2018. It returned $13.5 billion to shareholders via share repurchases and dividends, which includes an annual payout of $2.16 per share, for a yield of 1.8%.
WMT stock carries a reasonable forward price-earnings ratio of 23.3, with a price-sales of 0.7.
For the fourth quarter of 2019, Walmart reported earnings per share of $1.38 on revenue of $141.7 billion, versus analysts’ expectations of $1.43 and $142.5 billion. Same-store growth of 1.9% was also less than analysts’ consensus estimate, but Walmart did manage to grow its online sales by 35%.
Looking ahead, analysts are expecting Q1 earnings of $1.15 per share and net sales of $127 billion. Full-year EPS is forecast at $5.09, with revenue of $542.3 billion.
The Bullish Case for Walmart
WMT stock has a lot of things going for it right now.
First, it’s been here before. During the financial crisis of 2008, Walmart did extremely well as customers turned to discount retailers to cut costs and stretch their paychecks. Walmart increased revenue by 7.2%, raised its dividend by 8% and saw its stock gain 20% in 2018. It outperformed the market by nearly 60%.
Already we’re seeing Walmart become one of the top shopping destinations for consumers. And that is likely to continue, according to Citi (subscription required).
“When we think about what has been working in general within the U.S. retail landscape (and what will likely continue to work), we would characterize it as online, off-mall, convenience and value. WMT checks all four boxes. And in the current COVID-19 crisis, WMT is in a favorable position. It is a largely consumables-based business (grocery is 55% of sales) and is value-priced. Because the company is there to serve customers through this period, we believe it will result in more customer loyalty with existing customers and help WMT gain new customers that might not have shopped WMT before.”
Second, Walmart is a growing e-commerce power that is driving sales growth. The majority of net sales growth in 2019 was the result of Walmart’s online operations. And WMT expects online sales to reach $50 billion globally in the next 12 months.
Part of Walmart’s online growth is global. It has a 77% stake in Flipkart, which is India’s e-commerce powerhouse. Flipkart increased its top line 42% last year and should account for 10% of Walmart’s online business in 2020.
Meanwhile, Walmart increased its online sales 37% in the U.S. last year. It anticipates growing them 30% for 2020.
The Bottom Line on WMT Stock
With a market capitalization of $354 billion and a stranglehold on the retail space, Walmart is geared to prosper both during the pandemic and as the market recovers in the second half of the year.
WMT stock gets an A ranking in my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
