Walmart
Stock Market Analysis

Is Walmart Stock A Good Buy?

Walmart is one of the biggest retail names in the U.S., but it is now looking to expand its e-commerce offering. 

The COVID-19 pandemic has caused businesses in many industries to reassess their strategy and adapt to changing circumstances. As a result, Walmart (NYSE: WMT) has been placing much more of an emphasis on expanding an e-commerce offering. Is Walmart a good stock to buy or will it fail to adapt to the times? 

Walmart: Bull Cases 

Walmart is the largest retailer in the world today and generates more annual revenue than any other company —$559 billion in 2020. After the release of its Q4 2020 figures, which were lower than expected, the share price fell by 6%. Many investors used this as an opportunity to get a discount on Walmart stock, with the dividend also increasing for the 48th consecutive year.

Demand has been strong for merchandise and Walmart’s digital growth has been near 3x pre-pandemic targets. Its app was the second-most downloaded in the shopping category in the U.S. last year. To expand its digital offering, Walmart has been focusing on developing its pick-up and delivery options across the region, which includes improved automation and capacity in an effort to make sure that speed and profit are maximized. 

This new service, along with Walmart+, is expected to carve out good long-term growth in the company’s share price. Walmart is forecasting significant revenue growth for its e-commerce offering in the coming years.

The company also now has its own advertising program called ‘Walmart Connect’ and is making advances in the fintech and insurance spaces. These business verticals will help to expand its customer base and provide some level of diversification. 

Its Sam’s Club wholesale brand has also been benefiting from improved operations, making the supply chain and inventory management much more efficient. Finally, the announcement that Walmart is raising the wages of 425,000 workers will likely put its competitors under a lot of pressure. Walmart is the biggest private employer in the U.S. and its workers will now get average pay of over $15. Failure to follow suit could cost competitors dearly. 

Walmart: Bear cases 

Walmart’s recent Q4 results added some uncertainty to investor’s minds as to the impact of increasing expenditure, with $14 billion in capital investment scheduled in 2022. This would be a $4 billion increase from 2020 figures and it would be the largest investment by the company since 2011. Adding to these costs is its wage increases, beginning on March 13. 

Despite hitting a record revenue figure of $152 billion in Q4, the increase of almost 7% year-on-year was not enough to meet prior forecasts and its share price suffered. With significant expenditures in the works, investors will be concerned about further failures to meet revenue expectations. 

The outlook for 2022 has not caused much enthusiasm either. Revenue growth is expected to be only in the low single digits as the company looks to back its strong performance during the pandemic.

Is Walmart stock a good buy? 

Walmart’s share price has risen consistently since April 2020. It is not a growth stock, so this is expected. While it is not going to light the world on fire with massive gains, it is a dependable option for most portfolios.

As Walmart is investing significantly in e-commerce, it is setting itself up for the coming decades. It is also is keeping staff happy with a wage increase, which will put more pressure on competitors. Therefore, Walmart looks to be a good stock to buy if you are looking for a dependable company that offers a consistent dividend.

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Andrew O'Malley
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.