For the risk-averse investor, the last several months have been like a rocket sled clear through the center of Crazy Town. Stocks that seemed to have little in the way of visible support shot up to multiples of their previous valuations, while long-term holdings began to collapse. I won't even bring up the brick-and-mortar retail market beyond noting it, because if you paid attention there, you already know what happened. However, there are still some bedrock principles we can take to the bank, as RBC Capital Markets put an upgrade behind one of retail's great standards: Walmart (NYSE:WMT).
Hiked Outlook Points Out the Last Few Months
It's not everyday stocks get upgrades from analysts, and RBC's latest upgrade doesn't come without a sound reason, either. The analyst bolstered Walmart from “sector perform” to “outperform” primarily as a result of the last several months. Walmart effectively demonstrated that it was in a position to handle nearly any kind of economic conditions, from boom to bust to bizarre dystopia, and all at a decent rate of return.
The ability to handle these various economic conditions, meanwhile, came about thanks to Walmart's impressive level of pre-positioning. RBC cites Walmart's sheer size, built to the dismay of many over the last several years, as well as its improved e-commerce presence and its overall value to the consumer. Additionally, Walmart's steadily growing grocery trade should give it a hand up going forward, as if there are further massive lockdowns, Walmart locations can continue doing business thanks to their “essential” status. Improving profitability in the US markets, meanwhile, puts the icing on the cake and makes Walmart a bullish call at RBC.
The Analysts, By and Large, Agree
Our latest research notes that RBC isn't going out on a limb here, as the consensus figure is not only currently a buy, but has been a buy for the last six months. The ratio going into that “buy” rating hasn't even changed much in that time frame; six months ago, the company had two “sell” ratings, eight “hold” ratings, and 24 “buy” ratings. Today, it's nearly identical, but it's up to 27 “buy” ratings now. Three months ago, the company slipped to its lowest level of average recommendation, but at two “sell”, nine “hold” and 25 “buy”, it was still leaning toward “buy” even then.
The price target has been on a rise as well, though in the latest month or so, it's nearly plateaued. Six months ago, it sat at a decent $132.53. A month ago, it rose to $150.44. Today, it sits at $150.87, which in average terms is virtually no movement at all.
What, Exactly, Could Stop Walmart?
While Walmart has often been painted as the villain in retailing—just ask all those folks whose small businesses went under when a Walmart moved to town—it's also made many of the right moves to keep going through just about any conditions. Look at the e-commerce platform notion; this time last year, no one would have known that a robust e-commerce platform would be the key to not so much economic success, but rather economic survival. Today it's manifestly obvious that e-commerce is no longer a nice-to-have option but rather a vital survival tool.
Moreover, Walmart hasn't been sitting on its e-commerce laurels, either; it's increasingly taking the fight directly to Amazon. One of Walmart's latest moves is a newly-minted wrinkle to its e-commerce product return system. Walmart recently struck up a partnership with Federal Express (NYSE:FDX) known as “Carrier Pickup by FedEx.” The partnership allows customers to, essentially, start the return process from home and print a pre-paid shipping label, which they can affix to their packages themselves. Then, a FedEx driver will go to that customer's house and pick up the item in question, effectively completing the return. Those without printers can simply get a quick response (QR) code from Walmart, and a FedEx employee will print the label and handle the shipping from there.
Take the smoothing of the online return process—which is huge; remember that commercial where the girl is trying to find the right dress online?—and add it to huge stores that are nearly lockdown-proof and you've got a recipe for a winning company. Throw in the fact that Walmart has been actively positioning itself to compete with online titan Amazon (NASDAQ:AMZN) and things only get better; the company's primary competitor is the biggest online retailer around. Thus, the risk-averse investor out there should take a second look at a Walmart buy, as the company has clearly positioned itself to weather just about any kind of economic storm.
Before you consider Walmart, you'll want to hear this.
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