Though Amazon Could Lead By 2026, Walmart Stock Has Upside - Forbes

Walmart stock has enjoyed a great run since going public. But Amazon Amazon — despite growing more slowly than the 27% rate the e-tailer enjoyed in the 2010s — is likely to surpass Walmart Walmart in sales by 2026.

Growing twice as fast, Amazon could beat Walmart in sales by 2026. That’s because last year, Amazon grew revenue 12% — twice as fast as Walmart’s 6%, reported the Wall Street Journal.

If both companies keep growing at the same rate between 2024 and 2026, Amazon — with $575 billion in 2023 revenue to Walmart’s $648 billion — will top Walmart with $808 billion in 2026 revenue — $36 billion more than the big box retailer’s 2026 revenue, according to my estimate.

I see one compelling reason to buy Walmart stock: the retail giant is capitalizing on its data science skills — to find ways to draw in new customer groups.

A look at Walmart’s boffo earnings report for the latest quarter and an analysis of how the giant store chain has sustained its growth, suggests more good news to come.

One negative — analysts see Walmart’s stock as nearly fully valued,

Walmart’s Excellent Quarterly Performance And Prospects

Walmart shares rose more than 7% Thursday after reporting results that beat expectations and raised guidance.

Here are the key numbers:

• FY 2025 Q1 revenue: $161.51 billion — up 6% and $2.1 billion more than the London Stock Exchange Group consensus, according to CNBC.
• FY 2025 Q1 adjusted earnings per share: 60 cents — up 186% and eight cents per shares more than the LSEG consensus, CNBC noted.
• FY 2025 Q1 Walmart U.S. sales + 3.8%, CNBC reported.
• FY 2025 Q1 Sam’s Club sales +4.4%, wrote CNBC.
• FY 2025 Q1 E-commerce sales +22%, CNBC reported.
• FY 2025 full year revenue growth guidance. Walmart “expects to hit the high-end or slightly top its previous full-year guidance” of net sales growth between 3% and 4%, according to CNBC.

More people are buying groceries at Walmart because consumers find it cheaper to cook at home than to buy food at fast-food chains or restaurants. Moreover, higher income shoppers appreciate Walmart’s convenience.

“We’ve got customers that are coming to us more frequently than they have before and newer customers that we haven’t traditionally had, and they’re coming into a Walmart whether it’s a virtual store online, or whether it’s one of our physical stores,” CFO John David Rainey told CNBC.

Shoppers continue to spend cautiously on nonfood items, he said, and more are gravitating to store brand products. In addition, inventory is lean, all of which has helped push sales and profit higher. “These are not inflation-driven results,” said CEO Doug McMillon on a May 16 call with analysts.

Where Will Walmart Find Future Growth?

Like all companies, Walmart has the potential to seek growth along one or a combination of five dimensions, as I wrote in Disciplined Growth Strategies. What jumps out from this analysis is that Walmart is using analytical horsepower on its vast consumer data stores to target new customer segments and raise the quality of the customer experience.

Here is what Walmart is doing on each of these dimensions:

• Current or new customers: Walmart has traditionally served lower-and middle-income customers but has targeted higher income consumers — those earning more than $100,000 a year. The higher income consumers shop more frequently at Amazon, Target Target , Trader Joe’s and Costco. “Walmart attracted many of those shoppers in recent years and now aims to keep them,” according to the Journal. High income consumers come to Walmart for items such as laundry detergent, fresh salmon, and watermelon, noted the Journal.
• Current or new products: Walmart operates retail and wholesale stores and clubs, e-commerce websites and mobile applications. The big box chain also has added new services such as advertising services through Walmart Connect, noted CNBC. Walmart sold $3.4 billion in ads in fiscal year 2023 — up 28% from the year before, reported the Journal. In February, Walmart announced the acquisition of smart TV maker Vizio in a $2.3 billion deal to boost the company’s advertising business. Walmart+, the company’s subscription-based membership program, contributed to growth in the first quarter, noted Rainey. Moreover, in April, Walmart launched “a new line of premium foods in a bid to draw new shoppers and encourage current shoppers to spend more,” according to the Journal.
• Current or new geographies: Walmart stores are located “throughout the United States, Africa, Canada, Central America, Chile, China, India and Mexico,” noted CNBC. Decades ago, geographic expansion was an important dimension of growth for Walmart, according to my book Goliath Strikes Back. New geographies seem less crucial now.
• Current or new capabilities: Walmart describes itself as a “technology-powered omnichannel retailer.” One of the key technologies driving its ability to target new customer groups is data science. Walmart’s data scientists aim to “represent the objective voice of the consumer,” Jen Acerra, vice president of consumer insights and strategy for Walmart U.S., told the Journal. After analyzing “millions of pieces of data a day” Acerra’s team has observed a new source of growth: “customized moderation” — meaning shoppers are moderating spending in certain areas so they can focus on higher priority needs such as taking a family vacation. the Journal reported. Moreover, Walmart is using its technology to reduce out of stock items, improve the checkout process, and otherwise improve the customer experience, noted the Journal.
• Current or new culture: Walmart does not seem to be changing its culture. Instead, the company is getting back to its good old culture which was disrupted by people working from home during the pandemic. “One of our competitive advantages is our culture — and that’s fostered by being together,” Rainey said. “We just feel strongly in the benefit of working together,” he added. Walmart is highlighting its “role as a good corporate citizen and emphasizing that it’s important to be the best at serving customers and workers, not just the biggest,” reported the Journal.

Analysts Are Bullish On Walmart

Does Walmart stock have more upside? Based on 27 Wall Street analysts offering 12-month price targets, there is slim upside of 3.3% to an average price target of $66.23, according to TipRanks.

One analyst was inspired by Walmart’s report to increased his price target. “We plan to raise our $50 fair value estimate by a mid-single-digit percentage (in line with the stock price reaction after the May 16 release), as we think the retailer is well-positioned to continue taking market share across various income cohorts,” analyst Noah Rohr of Morningstar wrote.

Walmart stock is up 20% so far in 2024 — slightly lagging Amazon’s 22% increase during the period. If Walmart’s data science skills enable the company to exceed modest expectations, the stock could rise more than Wall Street expected.

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