Walmart Shares Hit Record High as E-commerce Expansion Continues

Walmart Inc. shares reached a record high of $83.34 on Wednesday, before dipping 0.28% to $83.04 on Thursday. The stock has soared more than 59% this year, marking gains for six straight months, the longest winning streak since 2002.

Walmart has been ramping up its e-commerce operations, broadening product offerings and enhancing distribution networks. The question remains: Will this intensify its rivalry with Amazon?

Walmart's e-commerce expansion has been a key growth driver. Since 2022, Walmart U.S.'s online sales have posted double-digit growth, with the latest July quarter seeing a 22% increase—outpacing the company's overall revenue growth of 5%.

According to Statista, e-commerce penetration in the U.S. reached 15.4% in 2023. Amazon leads the U.S. e-commerce market with a 37.6% share, while Walmart ranks second with a 6.4% share.

Walmart holds a strong position in the online grocery sector, boasting a broader and more competitively priced product range than Amazon. In contrast, Amazon's primary categories are electronics, fashion and apparel, and leisure and entertainment, accounting for 29%, 26%, and 12% of its sales, respectively. Both companies are increasingly focusing on online pharmaceutical sales.

Grocery is the largest retail category but has a relatively low online penetration of 13.7%. eMarketer projects that the online share of grocery will continue to grow, surpassing apparel and accessories by 2026 to become the largest e-commerce category, accounting for 19% of online sales.

Walmart operates over 5,200 stores in the U.S. During its latest earnings call, Walmart reported a roughly 50% increase in U.S. store delivery volumes in the July quarter, driven by more customers choosing one-hour or three-hour delivery options for e-commerce orders at an additional cost. Over 45% of operations at its e-commerce fulfillment centers are now automated.

Internationally, Walmart's e-commerce performance is also noteworthy. In the latest quarter, China's one-hour delivery orders rose by 28% to 59 million. In India, Flipkart's grocery business grew by more than 50%, offering next-day delivery across over 200 cities.

Several banks, including Bank of America, Citigroup, and UBS, have raised their price targets for Walmart in the past month. Bernstein and Citigroup have designated it as a top pick.

Analysts broadly agree that Walmart is poised to build a more comprehensive ecosystem, continue expanding its market share, and improve both its e-commerce market share and profit margins.

UBS increased Walmart's price target from $81 to $92, maintaining a Buy rating. The bank asserts that Walmart is still in the early stages of market expansion. By 2026, UBS anticipates that Walmart's third-party marketplace could generate over $150 billion in gross merchandise value (GMV), contributing $15 billion in revenue. For CY2024, the company's GMV is projected at $90 billion. UBS believes Walmart will enhance its market presence and improve its e-commerce market share and profit margins by better integrating physical and digital offerings.

Citigroup raised its price target on Walmart to $98 from $75, maintaining a Buy rating. The analyst notes in a research report that Walmart is gaining market share due to its scale, convenience, and leading omni-channel offerings. Citigroup believes the company's strong back-to-school season performance will extend into the holiday season. The firm expects Walmart's higher-margin growth opportunities to drive increased sales and EBIT margins, potentially altering long-term investor perceptions of the company.

Baird raised Walmart's price target to $90 from $82 and maintained an Outperform rating. Following discussions with investors in Australia, Baird states it is increasingly evident that Walmart's vision of becoming an omni-channel retail disruptor is rapidly materializing. The firm believes Walmart continues to gain omni-channel market share while building momentum in alternative revenue streams.