For the first time in over 20 years, retail giant Walmart (WMT -0.08%) executed a stock split with shares trading on a post-split basis as of Feb. 26. The company's decision to do a 3-for-1 split was motivated in part by a desire to ensure shares remained affordable for employees, also known as associates.
Referencing founder Sam Walton in explaining the stock split decision, Walmart CEO Doug McMillon said, "Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates."
Walmart shares reached an all-time high of $181.35 on Feb. 20. Since then, the company's share price remains near its split-adjusted 52-week high of $60.45, raising the question of whether it's a buy.
To decide if it makes sense to pick up Walmart shares, let's examine the company beyond its stock-split action, as a long-term investment.
Walmart's successful sales growth
Walmart's business is doing well. It wrapped up its 2024 fiscal year, ended Jan. 31, with fourth-quarter revenue of $173.4 billion, a 6% increase from the prior year. Its full-year sales of $648.1 billion was also a 6% year-over-year jump.
The company expects its revenue growth to continue in fiscal 2025, forecasting at least a 3% increase in net sales over the prior year. Walmart's fiscal 2024 net sales, which excludes some income such as its Sam's Club membership fees, totaled $642.6 billion.
The anticipated rise in revenue this fiscal year may mean a potential increase for Walmart's stock as well. The company's share price has been in lockstep with its sales growth over the past several years as both headed steadily upward.
Adding to this are estimates by Wall Street analysts that Walmart will reach a median share price of $65, indicating a belief in upside for the stock.
Data by YCharts.
Walmart's diversified business
Walmart's ability to grow revenue over time is thanks to its diversified income streams. The company has expanded beyond store sales and is finding success in these efforts.
Walmart's e-commerce revenue rose 23% year over year in Q4 and crossed $100 billion for the year. Its advertising business is thriving with 33% year-over-year sales growth in Q4 and hitting $3.4 billion for fiscal 2024, a nearly 30% year-over-year increase.
In addition to revenue growth, Walmart's free cash flow (FCF) also grew, rising by $3.1 billion from fiscal 2023 to reach $15.1 billion. FCF provides insight into Walmart's cash available to invest in its business, pay debt obligations, repurchase shares, and fund dividends. Walmart's healthy FCF growth enabled it to raise its dividend for the 51st consecutive year, as well as increase it by the largest amount in over a decade.
The company is also well-positioned to invest in its business, and as part of that, it's acquiring television maker Vizio for approximately $2.3 billion. Walmart's deal to buy Vizio isn't just about selling more TVs in its stores. McMillon said, "This acquisition accelerates the build-out of our advertising platform into the connected TV business."
Connected TV (CTV) is one of the fastest-growing areas in advertising with global revenue forecast to increase from $25.9 billion in 2023 to $42.5 billion by 2028. Vizio televisions are built with technology enabling CTV advertising. In fact, Vizio's Q4 advertising revenue rose 36% year over year. Moreover, its advertising income accounted for the majority of Vizio's sales growth over the past five years, according to Walmart.
Deciding whether to buy Walmart stock
There's a lot to like about Walmart's business right now. The company is second in U.S. e-commerce sales behind Amazon. Walmart is rapidly expanding its advertising business, and the Vizio acquisition helps to further strengthen this revenue stream.
Walmart also owns a flourishing international operation. This part of its business produced fiscal 2024 revenue of $114.6 billion, up over 13% from 2023. A long history of dividends adds the icing on the cake, providing a source of passive income. These various factors combine to make Walmart a worthy long-term investment.
