Source: PaxForex Premium Analytics Portal, Fundamental Insight
When Apple became the world's first $1 trillion company in 2018, investors celebrated and speculated about the next company to reach that milestone. It turned out to be Microsoft the following year.
Much has changed since then. Reaching the trillion-dollar mark is no longer a rarity. Four more companies have joined Apple and Microsoft in the trillion-dollar club, with Tesla briefly making the list in early 2022 before facing challenges. Currently, both Apple and Microsoft boast market values exceeding $3 trillion, making investors less impressed by the trillion-dollar milestone.
However, they might be surprised by the next seemingly unlikely candidate: Walmart. The brick-and-mortar retailer is quietly edging closer to the trillion-dollar finish line than many investors realize.
Admittedly, some companies are currently closer to a $1 trillion market cap than Walmart. Pharmaceutical giant Eli Lilly, for instance, has a market cap exceeding $800 billion, with its weight loss drug Zepbound driving significant potential. Tesla could also rejoin the trillion-dollar club if it navigates its challenges successfully.
For a retailer to become the first in its industry to surpass the $1 trillion mark would be remarkable, to say the least.
Walmart, however, has all the tools and favorable conditions needed to achieve the revenue growth required to reach this milestone in the foreseeable future.
The first and most obvious advantage Walmart has is its reach.
As the world's largest retailer, Walmart operates over 10,500 stores globally, with more than 4,600 in the United States alone. This figure doesn't include the 600 Sam's Club membership-based warehouses. Although pinpointing its exact global market share is challenging, Walmart clearly dominates the US retail landscape.
Size alone isn't always an advantage, but in Walmart's case, it is.
Walmart's extensive footprint not only deters potential competitors from entering the market but also ensures that a significant portion of the nation's consumers are regular Walmart shoppers. On average, these customers visit a Walmart store at least once per week and spend several thousand dollars annually.
Walmart is elevating every aspect of its business. The advantage of scale goes beyond just physical presence. As the most crucial distributor and retail partner for many suppliers and vendors, Walmart can negotiate the best prices. Passing these savings on to consumers has been especially beneficial since 2022 when inflation surged. Even relatively affluent households earning over $100,000 began shopping at Walmart regularly. With Walmart's efforts to offer more luxury and high-end brands, many of these new customers are likely to remain even after inflation eases.
Meanwhile, Walmart is investing heavily in e-commerce.
Although it was initially behind Amazon in online shopping, Walmart is making significant strides. Last quarter, its online sales grew 21% year over year, outpacing Amazon's North American e-commerce growth of 12%. Major investments in robotics and automation - investments beyond the reach of most smaller retailers - are driving Walmart's impressive e-commerce growth.
Walmart's transformation doesn't stop there. The company increasingly views Walmart.com as an advertising platform for suppliers to promote their products. In the three months ending in April, revenue from this ad business grew by 24% globally.
Additionally, Walmart is poised to enhance its digital ad business with the acquisition of smart-TV maker Vizio, which generates nearly $2 billion annually, almost half from advertising revenue through its smart-TV operating system and platform. Integrating this technology with its existing ad business could make Walmart a significant player in digital advertising.
Given these initiatives, analysts forecast that Walmart's revenue will exceed $800 billion by 2028, nearly 20% higher than this year's projected sales. If this growth rate continues, Walmart's annual revenue could surpass $900 billion by 2030, with per-share earnings approaching $4.
But will this be enough to boost Walmart's current market cap of $535 billion to $1 trillion by 2030?
While predicting the future is always uncertain, given Walmart's current valuation of just over 0.8 times its revenue and a trailing price-to-earnings ratio of 28.5, this level of growth might not be sufficient to reach a $1 trillion market cap by 2030.
However, achieving this milestone by 2032 is not only possible but likely. This would be particularly impressive as Walmart would be one of the first non-tech companies to join the trillion-dollar club.
In any case, Walmart stock remains a great investment prospect, even if it doesn't reach the trillion-dollar milestone within the next six years. Growth is growth, and Walmart is poised for significant advancements.
As long as the price is above 63.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 67.25
- Take Profit 1: 69.00
- Take Profit 2: 71.00
Alternative scenario:
If the level of 63.00 is broken-down , follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 63.00
- Take Profit 1: 61.00
- Take Profit 2: 59.00
