Walmart (NYSE:WMT) has done a magnificent job of holding its own over the years amid continued disruptive pressures applied by e-commerce retailers, most notably Amazon.com (NASDAQ:AMZN).
Undoubtedly, Walmart will continue to play the role of a disrupted retailer. But with smart investments in e-commerce and other high-tech categories, is it time that investors reward the company with a richer multiple, as a growing portion of sales moves online? Or is Walmart stock still at risk of losing share, now that Amazon has surpassed it in sales?
Undoubtedly, it was no surprise to see Amazon finally outselling Walmart. It was a real passing of the torch amid a pandemic-plagued year. Still, I remain bullish on Walmart stock, even while it takes a backseat to Amazon.
In the return to normalcy, one has to think that Walmart may be in a spot to gain a slight upper hand, as consumers return to brick-and-mortar at the expense of their favorite digital retailers.
As proof, Amazon's recent quarter revealed a notable slowdown in its e-commerce business. Could it be that brick-and-mortar is about to make a comeback as COVID-19 restrictions go away? Perhaps that will happen over the near- to medium-term, if COVID-19 cases are kept under control. Over a longer-term horizon, though, consumption is likely to gravitate back towards e-commerce, in what could be a normalized scenario.
In any case, Walmart remains very well-positioned to meet the demands of its customers, whether via its digital platform or its physical stores. As a dominant omnichannel retailer, Walmart is a worthy competitor of Amazon and many other digital retailers. (See Walmart stock charts on TipRanks)
Don't Underestimate Walmart
Retail can be a pretty tough business in which to thrive. There's a competitive threat lurking in every corner. Many dominant retailers in decades past have faded into the background, as new leaders took their places.
Undoubtedly, many e-commerce players received a big boost amid the pandemic. Whether we're talking about Amazon or big-name brands that decided to cut out the middleman by going direct-to-consumer by means of an e-commerce platform, it's clear that retailers who don't make a mark online will be left behind. Or perhaps even left for dead.
Walmart, while a brick-and-mortar retailer first, is not going away without a fight. It's not going to be a relic of the past anytime soon, even as Amazon continues to outpace it in sales.
Walmart has not shied (or cheaped) away from making digital investments to adapt to this new age of retail. While digital-first retailers may have the advantage, this advantage could shrink with every deal and investment that Walmart adds to its arsenal.
Walmart looks to be headed in the right direction, as it seeks to find the perfect mix of physical (store count) and digital. If you think omnichannel is the real future of retail, Walmart could prove to be a magnificent bet. It has the edge in the physical, with the ability to continue to make strides in the digital.
At 0.7 times sales and 5.1 times book, WMT looks very cheap given its ability to adapt and a physical advantage that may power the stock higher post-pandemic.
Wall Street's Take
According to TipRanks’ consensus analyst rating, WMT stock comes in as a Strong Buy. Out of 22 analyst ratings, there are 18 Buy and four Hold recommendations.
As for price targets, the average Walmart price target is $172.48, implying an upside of 18.2%. Analyst price targets range from a low of $156.00 per share to a high of $190.00 per share.
Disclosure: Joey Frenette owned shares of Amazon at the time of publication.
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