Is Walmart Recession-Proof?

The markets have largely sold off and there have been an overwhelming number of losers across the board. The Dow Jones industrial average has one clear-cut winner from this, though, and that is Walmart Inc. (NYSE: WMT | WMT Price Prediction). The Dow is down over 30% from an all-time high in mid-February, but Walmart is actually up about 7% since then. With recession fears on the rise, it begs the question: Is Walmart recession-proof?

Despite the market sell-off, Walmart stock actually hit all-time highs in Wednesday’s session. Comparatively, Costco Wholesale Corp. (NASDAQ: COST) and Target Corp. (NYSE: TGT) have similar charts to Walmart, but they have yet to break positive since the initial drop.

While the stock market has been panic selling, consumers have been panic buying. Grocery stores have been plagued by empty shelves due to growing concerns about this novel coronavirus.

More and more individuals are practicing social distancing, and some even quarantine. Hence, the need for supplies. The so-called stay-at-home economy has seen a big boost from these practices as well.

Walmart stands above all national retailers in a few regards. First, it has the strongest supply chain of the group. So with rising supply chain concerns, Walmart will be more apt in resupplying its stores as concerned customers continue panic buying.

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Apart from its brick-and-mortar locations, Walmart made a huge investment in e-commerce a couple years back with its purchase of Jet.com. While e-commerce has been a growing trend in years past, it’s set to explode now as a growing number of customers will rely more heavily on home delivery in the coming months.

With that said, Amazon.com Inc. (NASDAQ: AMZN), stands to benefit from its massive home delivery network as well. However, Walmart’s network of stores and supply chain relations could prove to be advantageous going forward.

One other thing: Walmart has spent the past five years aggressively expanding its online grocery business. It initially started as a way to fight Amazon and other grocers. Now, this could really pay off for ever more customers who are stuck at home.

A couple of analysts have weighed in. Credit Suisse upgraded Walmart stock to Outperform and raised its price target to $127 from $115. The firm noted that Walmart enters this uncertain period in a position of strength. Morgan Stanley said that Walmart was a clear winner, while other retailers are forced to close stores and furlough employees.

Credit Suisse’s Seth Sigman detailed in the report:

Our change reflects a more defensive near-term view on US Retail amid COVID-19 concerns, but there’s more to it: We see this unfortunate period accelerating structural changes in consumer shopping, possibly by 5+ years, as they are introduced to new retailers and new shopping methods incl. online grocery and delivery, and further consolidate purchases at multi-category, multi-channel retailers. This change should be sticky, and favor Walmart, as it’s invested in its infrastructure, technology and people, to evolve its model. In our view, Walmart is no longer just an early cycle, defensive, low price player, as in prior cycles. Its market share growth story and this period should validate the changes it’s made.

While store hour reductions at Walmart and other retail giants are becoming the norm, Walmart and other major retailers of food and staples were all effectively pledged to keep their stores stocked and operating throughout the coronavirus crisis.

Walmart stock traded up about 6% to $126.61 on Wednesday, in a 52-week range of $95.00 to $128.08. The consensus price target is $129.07.

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