Analysts Bullish On Walmart's Growth Initiatives & Future Growth

Key Points

• Walmart has been investing in various technologies and retail concepts to improve efficiencies and drive revenue.
• Analysts covering Walmart have a consensus view of a "moderate buy" with a price target of $166.91, an upside of 8.09%
• The company has heavily invested in its e-commerce business and focuses on omnichannel customer initiatives which integrate physical stores, online platforms, and mobile apps.
• Walmart's e-commerce business grew from $43 billion in 2021 to $53.4 billion in fiscal 2023.
• The company has a track record of increasing shareholder payout and a dividend yield of 1.48%.

The Walmart Inc. NYSE: WMT shopping experience doesn’t conjure up the same digital efficiency as clicking the Amazon.com Inc. NASDAQ: AMZN “buy” button, but there’s more going on behind the scenes of the big box retailer. 

Walmart has been investing in not only the things you might expect, like store updates and new retail concepts but also a range of technologies designed to improve efficiencies and drive revenue. 

It’s not the kind of thing that would send a stock appreciably higher immediately, but it’s exactly the kind of investment that companies make with an eye on future returns. 

But be aware: The analysts who cover the retail giant are well aware of the company’s growth initiatives. MarketBeat’s Walmart analyst ratings show a consensus view of “moderate-buy” with a price target of $166.91, an upside of 8.09%.  

Analysts Boosting Price Targets

Since the company reported the first quarter of fiscal 2021 on May 18, eight analysts boosted their price targets, and one initiated coverage with a rating of “outperform.” 

While Amazon is known for experimenting with drone deliveries, Walmart has been doing the same. It’s partnering with drone delivery services such as DroneUp, testing the concept in locales in Florida and Texas. 

In addition, Walmart is invested heavily in its e-commerce business, something the company notes in its most recent annual filings, referring to its “increasing investments in eCommerce, technology, automation, supply chain, new stores and clubs as well as remodels and other omnichannel customer initiatives.” Those initiatives include same-day pickup and delivery.

Integrating Multiple Sales Channels

By omnichannel, Walmart means a business strategy that integrates multiple channels, such as physical stores, online platforms, and mobile apps, to create a seamless customer experience. A good example of how that works is if you purchase a product online but are able to return it to a physical store location without hassle. 

The pandemic pushed not only Walmart but also rivals, including Target Corp. NYSE: TGT to quickly make changes, such as seamless online ordering and curbside pickups, which are still in effect today, as customers grew to appreciate the convenience. 

At the end of 2022, Walmart had over 8,100 pickup and approximately 7,000 delivery locations globally.

Highlighting Supply-Chain Tech

At an April investors’ day, Walmart highlighted its next-generation supply-chain technologies, with an emphasis on how they will contribute to the omnichannel growth strategy. 

The company said the re-engineered supply chain “is enabled by greater use of data, more intelligent software and automation. The outcome improves in-stock, inventory accuracy, and flow whether customers shop in stores, pick up, or have a delivery.”

And yes, there’s an AI angle here. For example, it’s been using AI to help online shoppers order groceries, which entails offering a suggested replacement if the requested product is unavailable. 

It also incorporated AI to predict whether customers are likely to buy certain items and whether they’ll pick them up in the store or have them delivered. 

Walmart’s e-commerce business grew from $43 billion in 2021 to $53.4 billion in fiscal 2023, which ended in January. E-Commerce sales at its other business units, Sam’s Club and Walmart International, also grew significantly. 

Directly Competing With Amazon

It’s no secret that Target and other brick-and-mortar retailers aren’t the only competition; for years, Walmart has understood the threat from Amazon. However, until recently, stumbled along in its efforts to challenge Amazon directly. 

As is clear from its omnichannel emphasis, Walmart isn’t trying to shift resources away from stores and toward online shopping, despite recently announcing closures of poor-performing stores. In fact, it’s been remodeling and reimagining the store experience. It’s been able to attract younger and higher-income customers, many of whom are remaining as inflation takes a bite out of their spending power. 

But retaining those customers isn’t a given, which is why Walmart has been investing in incubator labs for up-and-coming businesses. Walmart Start is focused on beauty brands, while Store No. 8 is focused on e-commerce.   

As a well-established mega-cap, Walmart isn’t likely to be one of those fast-moving stocks, but its institutional quality and the Walmart dividend yield is 1.48%. The company has a 51-year track record of increasing its shareholder payout, a testament to its commitment to innovation to drive profitability.