The Top Reason to Be Bullish on Walmart Stock

Walmart-StockWMT Stock Building on E-Commerce Strengths

Wal-Mart Stores Inc (NYSE:WMT) surprised everyone with its fourth-quarter results, which showed strong growth in e-commerce sales in the 2016 holiday season. Walmart stock went up on the good results announcement but investor concerns regarding its ability to compete with Amazon.com, Inc. (NASDAQ:AMZN) have been weighing on it. WMT stock closed in the red Thursday and closed at $70.44.

The world’s largest retailer has been on an acquisition spree lately and has been doing well in its attempts to challenge the dominance of Amazon. Its acquisition of Jet.com has been fruitful, and Walmart has not stopped shopping for more deals through its online subsidiary. Although the company has a lot of ground to cover and still lags behind Amazon, there are reasons that warrant a bullish outlook on Walmart stock.

Online Acquisitions to Strengthen Walmart and WMT Stock

The recent news is that Walmart Stores is acquiring ModCloth through Jet.com, according to people familiar with the deal. ModCloth is a 15-year-old online retailer and is popular for its vintage-inspired clothing for women. Although it is famous, ModCloth has not been able to operate profitably and has not been successful in getting additional funding. Over the last one year, Jet.com has already acquired Hayneedle, an online furniture seller, ShoeBuy, and Moosejaw. (Source: “Walmart is acquiring ModCloth, the online women’s fashion retailer,” Recode, March 15, 2017.)

The move is significant as an increased number of product offerings in its online store will further boost Walmart’s online sales and benefit WMT stock. Given the vast collection of products on Amazon’s online store, Walmart has to be fast in the catching-up game. However, the acquisition news has not been confirmed by either party.

Given the fact that Amazon is investing in brick-and-mortar stores to strengthen its business, the future of retail belongs to the players who can leverage their physical and online presence better. And Wal-Mart Stores Inc is well placed to take advantage of this transformation.

Investments in Brazil May Spring a Surprise

Reports have come in that suggest that Walmart is planning to rebrand and renovate many of its hypermarkets in Brazil, which has proven to be a difficult market for the retail giant. Brazil is the fifth-largest consumer market but Walmart has not been able to gain much success in the region. However, Walmart is hopeful of a turnaround, as it has planned to spend about $320.0 million over the next three years to upgrade its hypermarkets in the country. (Source: “Wal-Mart Doubles Down in Brazil Despite Sluggish Sales,” The Wall Street Journal, March 12, 2017.)

The long-term bet in Brazil may not turn out as expected. Although it seems to be an uphill task, a small uptick in the Brazil business could raise investor expectations and buoy Walmart stock in the future.

The Bottom Line on Walmart Stock

Walmart’s new acquisitions in the online space are likely to boost the competitive position of the company. Its investments in new markets and technology would be positive in the long run. In the short term, however, WMT stock investors may have to experience some setbacks. That said, the long-term growth story remains intact.

The company’s better-than-expected results in the fourth quarter have brought optimism to investors and the likely tax relief measures to be announced by president Donald Trump should be the icing on the cake. Investments through Jet.com shall keep the growth rate high in the coming years.

WMT stock has shown much movement for the past few months, however, the bright prospects for e-commerce bode well for the company. Walmart is in a strong position to combine the strengths of its online presence as well as physical stores and is unlikely to disappoint Walmart stock investors in the long term.


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