Retail giant Walmart (NYSE:WMT) was one of the best-performing stocks during the first half of the year. Year-to-date (YTD), WMT stock is up more than 32%, beating the S&P 500’s 14% gain.
However, given the remarkable surge in value, many investment pundits remain skeptical about any further upside in the second half. Nevertheless, with its robust core retail business and fast-growing segments like advertising and eCommerce, Walmart still has much to offer. Thus, Walmart stock remains a buy, with plenty still left in the tank.
Walmart has been in the game for more than 50 years and now operates as a mature, slow-growing giant. Therefore, the next leg of growth for the company will likely be driven by innovative new ventures. As I mentioned earlier, Walmart’s not the kind to keep resting on its laurels. It continues leveraging its reach, consumer data and financial resources to power potent growth engines. Therefore, let’s look at two key areas that are driving rapid growth for its business.
Revolutionizing Retail with In-Store Advertising
Walmart’s advertising segment has emerged as the biggest bright spot in its recent quarterlies. The retail behemoth is effectively leveraging its massive reach across roughly 4,700 U.S. stores to build on its advertising prowess. It has effectively transformed 170,000 digital screens in its stores to show third-party ads on digital screens, self-checkout lanes, store radios and in-store demo stations. These moves have allowed Walmart’s partners to engage the massive foot-fall in its stores, thereby driving sales while building on shopping experiences.
Consequently, Walmart Connect, the firm’s U.S. advertising segment, has shown superb growth potential. And, it could hit a whopping $6.18 billion by 2025. In the first-quarter of fiscal year 2025, Walmart Connect’s revenue jumped 26%. Further, the company’s global advertising business surged 24% year-over-year (YOY).
Moreover, its active advertiser base increased by roughly 19%, driven by a 50% jump in marketplace sellers. Also, Walmart’s acquisition of Vizio for $2.3 billion and a new streaming deal with Disney (NYSE:DIS) is set to add new layers to its advertising capabilities, facilitating more effective ad targeting and measurement using first-party data.
Digital Sales Continue To Impress
Walmart is arguably the most popular big-box retailer, but in recent years, we’ve seen it gain a massive foothold in the eCommerce realm. It has quickly risen up the ranks in the digital realm and is now the second-largest eCommerce retailer in the U.S. market.
The pandemic was huge for Walmart, where eCommerce sales jumped from $39.7 billion to a whopping $64.9 billion, reflecting the changes in consumer shopping patterns. Since then, online sales have continued to grow by at least $9 billion annually, which led to it posting $100 billion in sales last year. In fact, from 2018 to 2023, Walmart has grown its online sales by an impressive 31.8%.
Moreover, its robust analytics tool in Luminate, has been making the rounds of late. The powerful tool allows retailers and suppliers to leverage Walmart’s vast repository of first-party shopping data to make more informed decisions. With a colossal amount of sales data, Luminate is poised to drive massive long-term Walmart’s eCommerce operations. This initiative is part of a broader effort to harness data to build on Walmart’s competitive edge in the market.
Bottomline on Walmart Stock
Walmart has been one of the most consistent performers over the past several years, that’s effectively weathered multiple economic downturns. Hence, the challenging economic scenario over the past couple of years has had little impact on the company’s operational performance. It continues posting strong beats across both lines while rewarding its shareholders with a growing dividend.
While concerns about the sustainability of its stock price linger, the recent robust growth in segments like advertising minimizes these worries. Moreover, Walmart stock attracts a consensus strong buy rating from Wall-Street analysts, with forecasts pointing to 7% upside from current levels.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
