Here’s Why Wal-Mart Is a Definite Buy

Wal-Mart (WMT) has appreciated considerably from its 52-week low levels, and it looks like the stock has more upside potential left. The company is making a lot of moves that should help drive its revenue higher. Let’s take a look at the company’s prospects.

Wal-Mart is now taking smart steps to grow further

Recently, Wal-Mart, the largest retailer around the globe, publicized a strategic partnership with JD.com. The company is selling its Chinese e-commerce platform, Yihaodian to JD.com and in return, the Wal-Mart will get a 5 percent stake in JD, whose value is approximately $1.5 billion.
JD.com accounts for the largest e-commerce retailer in China by revenue.

Wal-Mart was putting a lot of efforts into raising its e-commerce business in China; therefore, the deal with JD.com will help the company grow further. Wal-Mart is now taking unexpected steps to hitch the power of technology in e-commerce and beyond to regain its competitive lead.

Numerous stockholders are moving away from Wal-Mart because of thinking that expenditures on new stores and growing wages will reduce profits. As a matter of fact, analysts’ estimates specify a 7 percent drop in the company’s earnings in 2016. But, the company’s payout ratio, at less than 50 percent, defeats P&G’s, which is only projected to descend to 70 percent this year from more than 100 percent previous year.

Other Steps

Wal-Mart is strategizing to introduce an autonomous shopping cart that will basically help the customers to find items in the store, and free them from the effort of pushing the cart through the store and parking lot. As per Bloomberg, the company is currently testing the cart’s sample in its lab. If the company successfully launches the robotic cart, it will certainly reduce the ease gap between Wal-Mart and Amazon.

Apart from these, Wal-Mart supported Amazon and various other companies such as Google in appealing to the FAA (Federal Aviation Administration) for approval to use drones for delivery, as the company claims that having a store within 5 miles of 70 percent of the Unites States residents would make it an exclusively useful tool.

Summing up

Despite Wal-Mart’s size, the company can still grow due to the initiatives mentioned above. With the market at all-time highs, investors should look at defensive investment options, and Wal-Mart is just one such pick.
Published on Jul 13, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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