The retailer could be a more exciting stock to own in the coming years.
Walmart (WMT 0.83%) could be the stock you never knew you needed in your portfolio. Sure, the retailing giant has a reputation for being unexciting. It competes in a mature industry that's characterized by low profit margins and slow growth, after all.
Retailers are lucky to convert 5% of their sales into earnings after paying their considerable expenses. That's compared to the tech giants that routinely post profit margins north of 30% of sales.
But don't dismiss Walmart as a potentially excellent long-term holding. The retailer isn't nearly as risky to own as many of its high-growth stock market peers. And it has a good chance of boosting its earnings power over the next several years. All of that is available at a valuation that might seem like a steal in just a few years.
1. It's good to be the leader
Market leadership confers benefits to the top dog in any industry, and Walmart is a clear beneficiary of that competitive advantage. The chain grew sales at a surprisingly strong clip through the holiday shopping season, both in its stores and through the online selling channel.
Comparable-store sales rose 4% in fiscal Q4, on top of the prior year's 8% spike. That result easily outperformed peers like Kroger and Target. In fact, Walmart gained market share in both the grocery niche and the general merchandise category.
A few factors went into that success, but the biggest dynamic is Walmart's pricing advantage. Its massive size allows it to sell at lower prices than peers, which is valuable in every selling environment but especially useful when consumers are looking to cut costs.
Look for even more gains ahead powered by this success. "We're ... excited about building on our momentum as we work to bring prices down for our customers," CEO Dough McMillon said in late February.
2. It's good to see earnings power expand
Walmart isn't known for its impressive profit margins, but the chain's earnings power is improving. Operating income spiked in the past year and is projected to outpace revenue again in 2024. It's great news for the business, meanwhile, that these gains arrived even as the company cuts prices amid strong sales growth.
A lot of credit goes to the retailer's push into tech niches. Its e-commerce sales jumped over 20% last year to cross $100 billion, for example.
Walmart is pouring resources into its digital advertising business at the same time, having just purchased Visio for $2.3 billion. Investors can see some early signs of success here because the profit margin rose by a full percentage point to reach 4.2% of sales.
3. It's good to see a stock that's priced just right
Walmart is still far from the 6% profit margin that investors saw back in 2015 before the chain began spending heavily on building its omnichannel retailing platform. On the other hand, it has several more attractive growth avenues available to it that just weren't available back then, such as its e-commerce and digital advertising.
Overall, then, shares look like a steal today if you believe the retailer can maintain its strong growth rate while expanding profit margins back toward that 6% level. The stock is trading for 0.7 times annual sales, which is toward the high end (but not at the top) of the range of premiums that investors have seen in the past five years.
Target costs the same but lacks Walmart's market-share leadership. Investors should consider Walmart a great deal that delivers stability with a reasonable shot at faster earnings growth.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.
FAQs
Walmart isn't known for its impressive profit margins, but the chain's earnings power is improving. Operating income spiked in the past year and is projected to outpace revenue again in 2024. It's great news for the business, meanwhile, that these gains arrived even as the company cuts prices amid strong sales growth.
Is Walmart stock a good buy right now? ›
Walmart has a consensus rating of Strong Buy which is based on 25 buy ratings, 4 hold ratings and 0 sell ratings. The average price target for Walmart is $70.76. This is based on 29 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
Is Walmart a profitable stock? ›
As an anchor of the consumer staples sector, Walmart sees comparatively stable demand through the business cycle. Walmart is also indisputably one of the best dividend stocks for dependable dividend growth. This member of the S&P 500 Dividend Aristocrats has increased its payout annually for 50 years and counting.
How much was Walmart stock in 1972? ›
The closing price for Walmart (WMT) in 1972 was $0.01, on December 29, 1972. It was up 7% for the year. The latest price is $64.85.
Is Walmart a good or bad investment? ›
Stability and Brand Name
With Walmart, it is pretty well-known what an investor is going to get from an operational perspective. Walmart remains a stable company that should be viewed as a long-term blue-chip investment. Roughly 75% of Walmart's store management began their careers as hourly employees with the company.
Why is Walmart so important? ›
Walmart helps people save money and live better. Walmart International delivers on this promise by bringing value and convenience to millions of customers in 18 countries outside the U.S.
What will Walmart stock be worth in 2025? ›
Long-Term Walmart Stock Price Predictions
| Year | Prediction | Change |
|---|
| 2025 | $ 70.45 | 8.24% |
| 2026 | $ 76.25 | 17.15% |
| 2027 | $ 82.53 | 26.80% |
| 2028 | $ 89.32 | 37.24% |
2 more rowsJim Walton, Alice Walton, and Rob Walton are the top three individual shareholders of Walmart. Walmart's largest institutional investors include the John T. Walton Estate Trust, Vanguard Group, and BlackRock.
How much was $1000 in Walmart stock in 1970? ›
Investing $1,000 In Walmart IPO: Walmart offered shares for $16.50 on Oct. 1, 1970 for its IPO. A $1,000 investment could have purchased 60.61 shares of Walmart stock.
Is Walmart a blue chip stock? ›
Three of the best blue chip stocks to buy, whether you're a seasoned investor or new to Wall Street, are Walmart (NYSE: WMT), Apple (NASDAQ: AAPL), and Eli Lilly (NYSE: LLY). Here's a closer look at these stocks to see why they can make for solid investments in the long run.
Walmart stock price stood at $65.38
According to the latest long-term forecast, Walmart price will hit $90 by the end of 2024 and then $100 by the middle of 2025. Walmart will rise to $110 within the year of 2027, $125 in 2028, $150 in 2029 and $200 in 2035.
Is Walmart more profitable than Apple? ›
Apple is among the most profitable companies in the world, ever. Market capitalisation is usually assessed in relation to earnings (profit) rather than revenue. Apple's P/E ratio is about 17, while Walmart's is about 15. Walmart has far higher revenue, but lower profits.
Is Walmart a good stock to buy? ›
The financial health and growth prospects of WMT, demonstrate its potential to perform inline with the market. It currently has a Growth Score of B. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of B.
Which stock is splitting in 2024? ›
2024 Stock Splits
| Date | Symbol | Company Name |
|---|
| May 29, 2024 | GV | Visionary Holdings Inc |
| May 28, 2024 | THAR | Tharimmune Inc |
| May 28, 2024 | SINT | Sintx Technologies Inc |
| May 24, 2024 | CIG.C | Energy Co Of Minas Gerais |
88 more rowsWalmart - 52 Year Stock Price History | WMT
- The all-time high Walmart stock closing price was 65.38 on May 24, 2024.
- The Walmart 52-week high stock price is 65.69, which is 0.5% above the current share price.
- The Walmart 52-week low stock price is 48.34, which is 26.1% below the current share price.
And Walmart is well positioned from a sales growth perspective too. The company's sales are expected to grow 4.2% this year versus the industry average of 1.2%. Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here.
Is it better to invest in Walmart or Amazon? ›
Overall, Amazon is growing faster than Walmart, with a 14% year-over-year revenue increase in 2023, and outside of pressure it experienced in 2022, it also usually reports a higher operating margin. Amazon has tailwinds from its many businesses, in particular from its investment in artificial intelligence (AI).
Why is Walmart so profitable? ›
Walmart's success can be attributed to having their own supply chain to streamline fulfillment and cut down on costs. It also provides them with more control over their logistics network. In this article, we take a closer look at the Walmart supply chain and why it continues to be so successful decades later.
Why is it worth investing in stocks? ›
The case for investing in stocks. Equities can add diversification and serve as a growth engine to help build value over time: Higher growth potential — Equities serve as a cornerstone for many portfolios because of their potential for growth.
