In recent years, Brick-and-mortar retail behemoth Walmart (WMT) has been on the receiving end of the e-commerce rise, but it has taken steps to adapt. Not only can it keep up with the times, but it may actually be able to compete better and claw back some of the business lost to popular e-tailers, most notably Amazon (AMZN).
Furthermore, it's not just continued e-commerce investments that could fuel a multiple expansion at WMT stock. In many ways, the firm's Walmart+ offering seems to rhyme with an earlier version of Amazon Prime.
Indeed, Walmart can't stop at just quick delivery of physical goods, though. It needs to do more to take the growth at Walmart+ to the next level. The brick-and-mortar retailer may have to offer intriguing tech services to its arsenal to improve the underlying value proposition of Walmart+, especially amid ongoing COVID-induced pressures that may not be so quick to fade in the new year.
I think Walmart has the technological capabilities to become an omnichannel powerhouse over the coming years, as it looks to take a page out of Amazon's Prime playbook with its Walmart+ service.
With a modest 0.7 times sales multiple, I remain bullish on the stock, as it looks to make up for lost time.
Is Walmart+ Ready for Prime Time?Amazon's Prime service offers an incredible value for the average consumer, with Prime Video, Music, Gaming services, a complimentary monthly Twitch subscription, and a wide range of other benefits thrown in to further sweeten the Prime pot.
Indeed, it's proven tough for many consumers to cancel their Prime memberships, even if COVID supply chain issues have lengthened delivery times for particular consumers.
In Canada, COVID's impact has weighed heavily on delivery times and merchandise availability. Shipping times for Prime-eligible products were shrinking before the pandemic. That all changed when the insidious Coronavirus arrived.
Despite lengthened delivery times and waning supply for certain items, a concerning flood of Prime cancellations didn't really happen. Why?
With so much must-watch content on Prime Video and other services that many subscribers have grown accustomed to, Prime has become too sticky thanks to services that go beyond shopping.
Walmart+ could become just as sticky over the coming years as it looks to tear a page out of Amazon's playbook by adding sweeteners in the form of complementary, value-adding services. Such services could be vital to making any subscription that much stickier.
Walmart+ Needs Extra Perks to Make It StickierWalmart CFO Bret Biggs really focused on growing Walmart+ in a conference call held a few months ago. For now, Walmart is striving to achieve best-in-class customer service in physical and digital. With a digital third-party seller platform that falls short of Amazon's, though, Walmart will need to go the extra mile to offer subscribers a value proposition they can't refuse.
Indeed, a solid omnichannel experience can help Walmart differentiate itself from Amazon, with brick-and-mortar-focused membership perks such as member price on fuel. Amid COVID-19 waves, though, a growing number of consumers will choose to stay at home, bringing forth the need for more digital perks such as video, gaming, and cloud storage.
The good news is that Walmart appears to be hard at work to create its own tech-driven services behind the scenes. The company has reportedly been working on a cloud-gaming service for many years now. Whether it'll be a perk included in the Walmart+ membership remains to be seen.
Regardless, Walmart does appear to be en route to improving its value proposition to better compete with Amazon. For that reason, Walmart stock is easy to get behind after a year of doing virtually nothing.
Wall Street's TakeTurning to Wall Street, Walmart has a Strong Buy consensus rating, based on 15 Buys and three Holds assigned in the past three months. The average Walmart price target of $172.11 implies 23.4% upside potential.
Disclosure: Joey Frenette owned shares of Amazon at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Holiday season shopping will reach peak mania over the next week. According to a recent Evercore holiday survey, Amazon (AMZN) is still the “top shopping destination across all categories.” That said, firm analyst Mark Mahaney notes that the survey results showed some slightly worrying trends.
First off, there was a “modest decline” in consumers’ purchase plans for Electronics, Accessories, and Clothing/Footwear categories on Amazon this holiday season.
Secondly, around 50% of shoppers intend on heading to a store this year to shop in-person, a 1,100-bps increase on the same period last year.
Thirdly, while last year 54% said they planned on spending more online, only 45% of respondents said they intend to do so this time around.
Mahaney sees several reasons for these “neutral-to-negative read-thrus.”
Evidently, after last year’s pandemic driven pivot to online shopping, consumers are hungry for “experiential/in-store” shopping, although Mahaney considers this trend as “transitory.”
Another possible explanation is that there might be a drop in Amazon’s “relative value prop, relative to other major retailers.” The analyst believes this is probably unlikely as there is no evidence to suggest an ongoing shift to “other large retailers” in the three categories which exhibited a decline.
Another “intriguing thesis” is that consumers are showing a preference for shopping locally in order to help the smaller business which were most affected during the height of the pandemic, although Mahaney is unsure of this theory too.
Nevertheless, the survey’s results lead Mahaney to be “more cautious” on Amazon’s near-term revenue outlook. As a result, Mahaney lowered his Q421 estimates with the revenue forecast now at the mid-point of Amazon’s Q4 guidance range.
That said, Mahaney’s long term thesis remains “intact,” and he believes investors have an opportunity here.
“We see Amazon (like all retailers) facing structurally higher wage/cost pressures, but we’re Bullish on AMZN’s ability to cost-innovate faster than just about any competitor,” the 5-star analyst explained. “For us, AMZN remains one of the highest quality assets in tech. In the past, investors have almost always made $ buying AMZN on dislocations. We don’t believe circumstances are any different now.”
To this end, there’s no change to Mahaney’s Outperform (i.e., Buy) rating or $4,300 price target. According to the top analyst, there’s potential upside of ~26% from current levels. (To watch Mahaney’s track record, click here)
All in all, 30 analysts have chimed in with Amazon reviews over the past 3 months and all are of the same opinion – Buy. The Strong Buy consensus rating is backed by a $4,127.5 average price target, implying one-year returns of 21%. (See Amazon stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Amazon (NASDAQ: AMZN) provides an e-commerce platform, facilitating the retail sale of consumer products and subscriptions all around the world. I am bullish on the stock.
As businesses get bigger, they can make more money -- and have more problems.
While Amazon's business is undoubtedly thriving amid a COVID-19-induced renaissance in online commerce, politicians and governmental agencies may apply stronger scrutiny.
As the regulatory screws tighten, Amazon's price-to-earnings ratio -- which is around 67 for the trailing 12-month period -- may decline. That's not necessarily a bad thing, as market opportunists can jump into the trade at a more attractive price point.
Getting Too BigValue hunters certainly wouldn't mind if AMZN stock fell towards the $3,000 level. Could harsh government enforcement actions cause this to happen in 2022?
It's definitely possible, as two U.S. senators are already looking to probe into Amazon’s labor practices.
The two senators are Florida's Marco Rubio and Ohio's Sherrod Brown. They issued a joint letter to Secretary of Labor Marty Walsh, stating that one out of every 170 U.S. workers is an Amazon employee.
The implication, supposedly, is that Amazon is getting too big and may be in violation of fair employment practices. Indeed, Amazon is massive as the company is the world's fourth-largest company by market capitalization.
Amazon also happens to be the second-largest employer in the U.S., and the onset of COVID-19 only seems to have increased the company's already vast influence.
If this investigation snowballs into something bigger and more worrisome, the AMZN stock price could shed some of its value in the short term -- and that's when contrarian traders could consider taking a long position.
An Even Deeper Probe, PotentiallyEven more potentially problematic is a separate governmental investigation, which could really sour investors' sentiment surrounding Amazon.
In particular, the U.S. Federal Trade Commission (FTC) is reportedly advancing an antitrust probe into Amazon's cloud computing business. That's according to Bloomberg News, which cited people familiar with the matter.
Allegedly, FTC officials contacted companies during the past few months in order to gather information about competition-related issues concerning Amazon Web Services (AWS).
Moreover, this probe appears to be a continuation of an investigation that was started during the previous U.S. presidential administration.
Evidently, neither Amazon nor the FTC has confirmed the current probe. Consequently, the full impact of these reported events might not be witnessed in the AMZN stock price for a while.
Nevertheless, prospective investors should keep an eye out for further developments.
Wall Street’s TakeAccording to TipRanks’ analyst rating consensus, Amazon is a Strong Buy, based on 30 unanimous Buy ratings. The average AMZN forecast is $4,127.50, implying 20.4% upside potential.
The TakeawayIt's not likely that any regulatory probe will have a permanent negative impact on the AMZN stock price. As we've discussed, Amazon is a huge company with wide-reaching influence in the U.S. and elsewhere.
Clearly, the analysts already know this; 30 out of 30 of them are bullish on Amazon.
So, if the government decides to clamp down on Amazon, don't fret.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
On December 22, a brief power outage was reported at one of Amazon's (NASDAQ: AMZN) data servers on the U.S. East Coast, according to Reuters.
As a result, various apps and websites, including streaming service Hulu, office messaging app Slack, and Epic Games, were temporarily hit.
DetailsSlack mentioned that its file uploads, message editing and other services faced problems.
Amazon stated that its platform that provides computing capacity to cloud networks operated by its unit, Amazon Web Services (AWS) was impacted by the outage.
However, all the services were up and running after some time. Amazon Web Services stated, “The issue has been resolved and the service is operating normally.”
Earlier this month, one of the FAANG Stocks Netflix (NASDAQ: NFLX) was hit by a major outage in the same region. Furthermore, Disney+, trading app Robinhood and Amazon’s E-commerce website were also impacted at that time.
Analysts RecommendationOn December 14, UBS Analyst Lloyd Walmsley reiterated a Buy rating on Amazon with the price target of $4700 (37.4% upside potential)
Consensus among analysts is a Strong Buy based on 30 unanimous Buys. The average Amazon stock price prediction of $4,127.50 implies 20.82% upside potential to current levels.
Smart ScoreAmazon scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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