Pros and Cons of Investing in Walmart

OVERVIEW

Walmart Incorporation is a company based in the United States. The company operates a chain of retail stores in over 24 countries and under 48 different brands like Walmart and Sams Club. The company sells groceries, outdoor products like bikes, pharmaceutical products line insulin, and other personal care products in over 10,500 stores. The company was founded in 1945.

PROS:

  1. Walmart is a great reopening play in an investor’s portfolio. The company saw a sharp rise in demand for things like school uniforms, school supplies, luggage, and other things as people started to go back out once again. This will help the company increase its sales in the short to mid term.
  2. Walmart has been aggressively expanding its online and e-commerce capabilities. It has expanded curbside pickup options to most of its domestic locations. It has also started Walmart+ (the Amazon Prime of Walmart) and its GoLocal delivery service, similar to Amazon logistics. If these bets pay off, it will help the company grow and will also benefit investors.
  3. Walmart, like many other US retailers like Kroger, has seen strong growth in groceries. The CFO of Walmart, Bret Biggs, contributes some of this growth due to better in-stock availability of produce. This is something that Walmart has done extremely well and an area where Amazon has lacked, particularly because 90% of Walmart live within 10 miles of a Walmart.
  4. Walmart can use its position as the world’s largest retailer to its benefit. From getting good deals on inventory purchases and maintaining in-stock positions, the company has leveraged its scale to continue to grow during rough times (like the pandemic). This has also benefited investors in the company. The revenue the company is able to bring in is incredibly high as well.
  5. The retail industry is an extremely revenue-heavy one. In the financial year of 2020, the company reported revenues of 559 billion, which is more money than Amazon and Facebook combined made last year. In its most recent quarter, the company reported revenues of around 141.05 billion dollars, having sales of over 1.56 billion dollars a day.
  6. Despite these impressive results, the company’s stock price has not gone up over the past couple of months. The company’s stock is up only 5%, far lower than its competitor’s 35%-40% return and also lower than the return of the S&P 500. However, I think that investors in the stock will purchase more as the company outperforms expectations.

CONS:

  1. The company faces tough competition in the retail industry. Some of these competitors include Target, Costco, Kroger, Albertsons, Amazon, and many others. This competition might hurt the company and its investors in the future.

MY OPINION

I think that Walmart is a great long-term investment due to its position as a good reopening play, strong e-commerce growth, strength in the grocery business, its massive scale, revenue-heavy business, as well as a cheap stock price. However, tough competition might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.