Walmart Inc.Long
Bullish on Walmart, short term long trade
Updated
I have been inactive here for past 2 years since I last post about FX picks and market analysis. Due to nature of job and industry I try to avoid conflict of interest, anyway below are my analysis of Walmart.
Background about Walmart:
*Brick & Mortar Shopping Mall with about 4,700 stores (Supercenter)
*>50% revenue comes from groceries, follow by breakdowns to General Merchant, Health & Wellness and Other category.
*2013-2015, Walmart allocated 50% capital to new stores but in 2020 it has reduced to <20% in new stores
*They have business exposure in US, China (Sam's Club) and India (Flipkart)
*Target customer in US (low-middle income), China (middle to high income)
*Competitor = Amazon, Reliance, Costco, Target
*Defensive stock
Through the *ugly help* of Covid19, Walmart is able to accelerate their e-commerce investment and adoption rate, specially on their Walmart+ subscription plan which started 7th July (share price shot up 7%-8% intraday). Walmart Plus membership will reportedly include same-day delivery of groceries and other merchandise sold by Walmart. Think of Walmart Plus as the retailer's answer to Amazon Prime. It is a new membership program designed to compete with Amazon Prime. For a traditional brick & mortar business to transit and evolve alongside with technology adoption, I am pretty positive of Walmart's Omnichannel solution strategy (is a multichannel approach to sales that seeks to provide customers with a seamless shopping experience, whether they're shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.) In July 29 they release a new online services "Ask Sam"; accommodating to customer's specify request such as price checking and locating fine products. While not forgetting about covid19's preventive measures they also added Curb side pick up for customers. (Lets just view it as their social corporate governance responsibility)
Moving forward, Walmart is putting greater focus on E-commerce, growing their online platform awareness and increase market dominance over the time via acquisition/partnership with Flipkart (81% stake), JD.com (10%) and Shopify (10% stake). The deal will open Walmart's Marketplace to Shopify's small business sellers, with the goal of bringing 1,200 Shopify sellers to the marketplace this year. Back in Q1 earning report, management has highlighted U.S. ecommerce sales shot up by 74% as the coronavirus outbreak drove more shoppers to buy online and pick up outside Walmart stores, as there are currently no clear vaccine for now, I believe that online grocery shopping data will remain sticky till Q4.
Catalyst - These are some events that are in favour of Walmart's share price
1. "Amazon says it is out of stock of household items and deliveries are delayed due to coronavirus demand", although this news happened back in mid-May, however this could also translate to lost of dissatisfied customer.
2. Walmart+ vs Amazon prime. Price and services competition. (competition of market share, shift in price sensitive customer)
3. Expended operating hours from usual 8pm to 10pm
4. More calls vs put for 21 August expiry options
I see this as a strong defensive stock similarly to how other retail supermarket stocks in other countries had rallied and remain bullish on their upcoming earning report on 18th. I am expecting better than expected earnings on their core business grocery and modest decline in their other segment of the business. This should also fit a nice breakout play to $145+/-
If you are bullish on this sector but cant decide which stocks to hold why not go for both Walmart and Target with decent portion of weighted portfolio. I am vested and above are just my small sharing. Good luck stay safe.
Background about Walmart:
*Brick & Mortar Shopping Mall with about 4,700 stores (Supercenter)
*>50% revenue comes from groceries, follow by breakdowns to General Merchant, Health & Wellness and Other category.
*2013-2015, Walmart allocated 50% capital to new stores but in 2020 it has reduced to <20% in new stores
*They have business exposure in US, China (Sam's Club) and India (Flipkart)
*Target customer in US (low-middle income), China (middle to high income)
*Competitor = Amazon, Reliance, Costco, Target
*Defensive stock
Through the *ugly help* of Covid19, Walmart is able to accelerate their e-commerce investment and adoption rate, specially on their Walmart+ subscription plan which started 7th July (share price shot up 7%-8% intraday). Walmart Plus membership will reportedly include same-day delivery of groceries and other merchandise sold by Walmart. Think of Walmart Plus as the retailer's answer to Amazon Prime. It is a new membership program designed to compete with Amazon Prime. For a traditional brick & mortar business to transit and evolve alongside with technology adoption, I am pretty positive of Walmart's Omnichannel solution strategy (is a multichannel approach to sales that seeks to provide customers with a seamless shopping experience, whether they're shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.) In July 29 they release a new online services "Ask Sam"; accommodating to customer's specify request such as price checking and locating fine products. While not forgetting about covid19's preventive measures they also added Curb side pick up for customers. (Lets just view it as their social corporate governance responsibility)
Moving forward, Walmart is putting greater focus on E-commerce, growing their online platform awareness and increase market dominance over the time via acquisition/partnership with Flipkart (81% stake), JD.com (10%) and Shopify (10% stake). The deal will open Walmart's Marketplace to Shopify's small business sellers, with the goal of bringing 1,200 Shopify sellers to the marketplace this year. Back in Q1 earning report, management has highlighted U.S. ecommerce sales shot up by 74% as the coronavirus outbreak drove more shoppers to buy online and pick up outside Walmart stores, as there are currently no clear vaccine for now, I believe that online grocery shopping data will remain sticky till Q4.
Catalyst - These are some events that are in favour of Walmart's share price
1. "Amazon says it is out of stock of household items and deliveries are delayed due to coronavirus demand", although this news happened back in mid-May, however this could also translate to lost of dissatisfied customer.
2. Walmart+ vs Amazon prime. Price and services competition. (competition of market share, shift in price sensitive customer)
3. Expended operating hours from usual 8pm to 10pm
4. More calls vs put for 21 August expiry options
I see this as a strong defensive stock similarly to how other retail supermarket stocks in other countries had rallied and remain bullish on their upcoming earning report on 18th. I am expecting better than expected earnings on their core business grocery and modest decline in their other segment of the business. This should also fit a nice breakout play to $145+/-
If you are bullish on this sector but cant decide which stocks to hold why not go for both Walmart and Target with decent portion of weighted portfolio. I am vested and above are just my small sharing. Good luck stay safe.
Trade active
Despite bullish financial release and extreme e-commerce penetration, share price for Walmart continue to tank. Pre-market share price pumped as high as +6% pre-conference call and tanked largely due to conference topic:
1. July sales slipped
2. Disappointed by management to avoid details on Walmart+
3. Management remove forward guidance outlook
4. Delay in US stimulus package
I remain upbeat on Walmart given:
1. Further e-commerce penetration
2. Sticky covid19 consumer data
3. Stimulus package release before September
Note
correction: 1. July sales slipped to 1. July sales show sign of weaknessTrade active
U.S. Jobless Claims Rose to 1.1 Million in Latest Week, data indicate layoffs remain elevated as labor market slowly improves.This would also put some pressure for faster stimulus bill release. Once the bill is approved and released, we may prepare for profit taking thereafter.
link for more details: edition.cnn.com/2020/07/28/politics/stimulus-bill-republican-democrats/index.html
Note
*Initial U.S. jobless claims totaled just over 1 million for the week ending Aug. 22, down from 1.104 million in the previous week.*Economists polled by Dow Jones expected initial jobless claims expected claims to come in right at 1 million.
*Microsoft, Walmart tag team offer Joint TikTok bid vying With Oracle
***WMT 9/18/20 C135 huge volume and open interest
Note
*TikTok Offers Walmart a Road Map With Chinese Cousin DouyinIf successful, Walmart’s bid alongside partner Microsoft Corp. could also enhance its soon-to-launch delivery subscription service, making it a more credible threat to rival Amazon.com Inc.’s Prime offering. TikTok could even become a platform to sell Walmart’s products, catapulting the 58-year-old Arkansas retailer into the emerging realm of “social commerce” against Facebook and its Instagram platform.
TikTok would give Walmart access to a large, young and loyal group of users coveted by advertising agencies and their blue-chip clients, who might shift some of their marketing budgets from Google, Facebook and Amazon over to Walmart’s in-house media arm.
Live streamed commerce across China tripled to 451 billion yuan in 2019 ($66 billion), about 4.5% of total online retail according to iResearch. That’s why Douyin is accelerating its transformation from an ad platform to one that also handles purchases. Douyin now invites reputable creators to set up in-app shops that feature prominently on their bio pages. It’s not just small merchants either. Chinese retailer Suning.com, a Best Buy equivalent, is the most recent to join.
Financing the deal likely won’t be difficult for the world’s biggest retailer, given its hefty cash balances and access to debt. The real challenge lies in just how different social media is from Walmart’s prior digital acquisitions, like Jet.com or Indian e-commerce site Flipkart.
Note
Tug-O-WarChina Business Digest: China has rolled out new export restrictions that may make it a lot harder for TikTok to offload its U.S. business, leaving the app’s owner Bytedance caught between Beijing and Washington.
Note
A TikTok Deal Is Reportedly Near, Unless New China Rules Get In the WayTrade active
Price target revise to $157Price moved before stimulus bill while due to other headline catalyst all these momentum leans towards bullish action
Note
The new subscription program, dubbed Walmart+, will be available on Sept. 15, the world’s largest retailer said in a statement. The program costs $98 a year, a discount to rival Amazon’s $119 annual Prime membership, and includes unlimited free delivery from stores -- including groceries -- plus gasoline discounts.Note
We are getting nearer to upcoming Stimulus bill
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