You'll Definitely Regret Missing Out on Wal-Mart & Here's Why

I recently recommended investors to buy Wal-Mart (WMT) following the stock’s pullback. My bullish stance has resulted in quick profits as the stock surged over 7% after delivering a stellar earnings report just a few days ago.

Even though the stock has rallied strongly, especially considering its market cap, I think it is still a buy. Wal-Mart’s business model makes it one of the safest stocks to own right now. With several concerns like growth uncertainty and rate hikes plaguing the market, Wal-Mart is a terrific buy. Moreover, Wal-Mart tends to outperform the market during a recession or a correction, which is another reason to load up the boat with it.

Expanding its online presence

Despite the continuously rising challenges in the industry, Wal-Mart is performing decently.
The industry has always been brutally competitive, and situations are becoming even more complicated for offline retail stores mainly due to surging competitive pressure from Amazon (AMZN) as well as other online competitors.

Amazon is comparatively small in size compared to Wal-Mart, but Amazon surpassed Wal-Mart in terms of market value in 2015. Amazon’s exciting growth rates account for the reason why stockholders are in favor of paying a huge premium for Amazon as compared to Wal-Mart. However, the company is now aggressively focused on investing for progress in e-commerce.

For Wal-Mart, the trend towards online sales is tremendously significant, as it has totally different consumer acquisition and retaining necessities, and various methods of competing. However, Amazon recognizes those trends, and hence carries on in leading its opponents in the online sales segment.

Amazon lingers to keep progressing, evolving at a hastier rate than the industry average, specifically in crucial areas. However, the company detailed that despite its huge resources and hard efforts, its online sales growth is just 7 percent. Therefore, it is very necessary for Wal-Mart to understand this one trend.

Wal-Mart is taking various steps to compete against the Amazon’s prime service. The company is on its way to introduce its new ShippingPass service which will be priced at $49 per year versus $99 Amazon Prime per year. Moreover, analysts at Thomson Reuters anticipate this as a positive move as the company is focused on intensifying its online existence, which might attract the consumers it has not formerly tapped.

On the other hand, the company’s grocery pickup service in the United States endures to experience high marks from consumers and it plans to magnify the service. When it comes to grocery sales, Wal-Mart beats Amazon by a huge margin, as more than 50 percent of the company’s top-line is generated from groceries.

The rise of e-commerce did have a negative impact on Wal-Mart, but investors should expect the stock to turnaround soon. Wal-Mart is a recession proof stock and is a definite buy post-earnings.
Published on May 27, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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