The retail titan Walmart Inc. (WMT) has delivered impressive third-quarter results despite the impact of the COVID-19 pandemic and a volatile macro environment. The company has gained 21.2% over the past year. Its performance has been driven primarily by new memberships and strong renewal rates.
In fact, with a much bigger digital presence now, and additional curb-side pickup services and subscription-based delivery offerings, WMT is poised to deliver solid returns going forward.
WMT was founded in 1945 and is based in Bentonville, Arkansas. It went public 35 years ago, making it older than 92.81% of listed U.S. stocks we are tracking. So, let us take a closer look at the factors that could help WMT maintain its momentum:
Changing Retail Landscape to Boost Growth
The pandemic has significantly changed how and what consumers buy, thereby forcing the retail industry to quickly innovate in a highly competitive environment and adapt to a growing online world. Retailers are diversifying and expanding their presence on the web to reach more customers and capitalize on a pandemic-induced online shopping boom. Since this change in consumer behavior is here to stay, retailers like WMT with a decent online presence should see significant growth.
WMT is Aiming to Snatch Amazon’s Market Share
WMT has extensive plans to expand its advertising business and is adding space for ads at its U.S. stores, thereby looking to challenge Amazon.com, Inc. (AMZN) as a media giant. In addition, WMT has partnered with Shopify Inc. (SHOP) to capture more online shopping market share from AMZN.
The company has been steadily strengthening its product lines and infrastructure. All WMT’s traditional brick and mortar locations have the potential to become fulfillment centers, which could give it an edge over AMZN.
Impressive Third-Quarter Results
WMT’s revenue has increased 5.2% year-over-year to $134.70 billion for the third quarter ended October 31, 2020. Its operating income grew 22.5% from the year-ago value to $5.80 billion, while its EPS rose 56% from the prior-year quarter to $1.81. The company’s Sam’s Club comp sales increased 11.1%, while its e-commerce sales grew 41% over this period. WMT’s membership income increased 10.4%.
Also, WMT has an impressive earnings surprise history. The company surpassed the Street’s EPS estimates in three of the trailing four quarters.
Favorable Revenue and Earnings Outlook
Analysts expect WMT’s EPS to rise 13.4% in fiscal 2021. The consensus revenue estimate of $555.01 billion for the current year represents a 5.9% improvement year-over-year.
Wall Street Analysts Predict a Decent Upside
The average of the price targets by 33 analysts indicates a potential upside of 13%.
Our POWR Ratings Indicate the Odds are in the Stock’s Favor
WMT has an overall rating of A which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors.
Our proprietary rating system evaluates each stock based on total eight different categories. Regarding these categories, WMT has a Value Grade of B, in sync with the stock’s forward Price/Sales of 0.72x, which is 50.8% lower than the industry average of 1.46x.
WMT also has a Momentum Grade of B. This is consistent with the stock’s 13.7% returns over the past nine months and 7.5% gains over the past six months.
To see the POWR Ratings for Stability, Sentiment, Quality, and Industry for WMT, click here.
There are four other stocks in the Grocery/Big Box Retailers industry with an overall POWR Rating of A. Click here to see them.
WMT is a good stock to buy now given its growing online presence, expanding advertising business, and impressive revenue and earnings growth. Since new customer behaviors pertaining to online shopping should largely persist, the company is well positioned to serve its growing customer-base and drive business growth. As the retail giant evolves from brick-and-mortar stores to e-commerce, the stock should keep gaining, which is why we think you should consider adding the stock to your portfolio. .
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WMT shares were trading at $139.73 per share on Monday afternoon, down $0.76 (-0.54%). Year-to-date, WMT has declined -3.07%, versus a 0.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…
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