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Why the Coronavirus Will Only Send Walmart Stock Higher

By Jennifer Saibil - Mar 25, 2020 at 10:53AM

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With a broad network of physical stores and solid infrastructure for grocery delivery, Walmart has gained the trust and loyalty of customers and a stable stock price amid the chaos.

It has everything you need and will bring it to your doorstep within a day (or two). And for most Americans (rural and otherwise), it's also likely to be within a few mile radius of your home.

It's Walmart (WMT 0.72%), and it should be on your stock-scouting radar.

Sales are up

During a regular fiscal quarter Walmart sees low single-digit revenue growth as we can see from these recent examples:

Metric

Q4 2019

Q3 2019

Q2 2019

Q1 2019

Year-over-year revenue growth

2.1%

3.3%

2.9%

2.5%

Data source: Walmart quarterly reports. Numbers are for constant currency.

With the development of the COVID-19 coronavirus, Walmart has been fielding increased demand and hiring thousands of new workers to meet it. Since many retailers have shut their doors and some state governments have ordered lockdowns, People have no choice but to turn to the consumer staples retailers, such as Walmart, Costco, and Target, who are remaining open.

Walmart employee preparing a delivery.

Image source: Walmart.

These stores are cutting hours to accommodate the new normal, with dedicated hours for the elderly and extra time for serious disinfecting. 

While some customers are still coming in for their necessities, those who opt to stay at home are increasing the company's delivery load. Walmart has both parts of the pie, and its got the capabilities to deal with such increased demand while other retailers close up shop. 

Share price is up

While the stock market has tanked and U.S. banks have declared a recession, Walmart stock has been weathering the storm. It opened 2020 at $119 and hit a high of $122 on March 18 while the Dow plummeted more than 1,000 points on the same day. It's holding steady at $109 as of this morning.

Walmart stock increased in 2019 after several years of growth and but had an underwhelming fourth quarter to top it off. It shot up at the beginning of 2020 and and the coronavirus has only slightly knocked it down.

That's because investors are confident in the retail giant's ability to carry out operations during this unprecedented time.

Emerging on top

The large retailers have all been doing better than the market overall as they continue to function and see high increasing sales. But Walmart's been less volatile overall.

A huge part of this pertains to grocery. While Amazon's been working hard to break Walmart's hold on grocery delivery, it still remains the No. 1 spot for grocery purchases both in store and online. Walmart has 5,355 stores spread out over all 50 states and it maintains its own trucks and drivers. And it pays well, too, an average of $87,500 a year for drivers.

With this market somewhat cornered, and with consumer staples (especially toilet paper) being shoppers' top priority while in quarantine or just laying low, all Walmart has to do is continue satisfying customers to keep its place. So far, it's meeting expectations.

These are some of the action the company has taken to care for customers and workers at this time:

  • Hiring an extra 150,000 workers to meet consumer demand 
  • To maintain a fleet of workers, the company is compensating full-time hourly employees with a $300 bonus and part-time employees with half of that.
  • But it's also letting workers who are nervous to take paid leave.

In the meantime, while rival Amazon has been having logistical issues and has warned that it won't guarantee on time delivery of non-essential items, Walmart is prepared to proceed, at least for the time being.  

Walmart shares are holding steady in the wake of the company's ability to come through at this time and show it's readiness to support its communities, and this should sustain it through the continued rough times and into better times ahead.

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$123.48 (0.72%) $0.88
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,080.00 (-3.31%) $-71.14
Target Corporation Stock Quote
Target Corporation
TGT
$147.71 (-4.03%) $-6.20
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$432.80 (0.77%) $3.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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