How to Buy Walmart Stock (WMT)

Introduction

Walmart (WMT) is a multinational retail giant headquartered in the United States. The company operates a network of discount department stores and several warehouse outlets. As of December 2023, Walmart had a vast presence in the retail industry, with over 10,500 establishments worldwide. Notably, Walmart is one of the leading private employers globally, with a workforce exceeding 2.1 million employees.

Highlights and Key Takeaways

• Walmart is a well-known corporation in the US. The company recently penetrated the Asian market to boost its expansion into emerging economies, offering investors security as it expands its portfolio worldwide.

• Despite growing competition from other online retailers, Walmart has made technological investments that help it remain profitable and relevant.

• Walmart’s reinvesting and increase of dividend payments to shareholders strongly indicate the company’s sound financial health.

Understanding Walmart As an Investment

Why Invest in Walmart?

There are three main reasons why Walmart shares are worthy investments:

• Walmart fights inflation. Because of its massive scale, Walmart mandates its suppliers to provide its consumers with the best pricing. In return, customers have given the business a well-deserved reputation for offering “everyday low prices.” 

The brand’s reputation is beneficial when the economy is struggling, and consumers look for products at lower prices due to frugality. During this period, Walmart usually sees an increase in sales that impacts its bottom line. 

• Walmart leads the $850 billion USD grocery sector. 90% of American households are within 10 miles of a Walmart shop, thanks to its extensive network of over 4,700 stores nationwide. The merchant can fulfill its e-commerce orders from a vast network formed by the comprehensive shop base. 

The robust shop network across the country is why Walmart still offers free delivery to Walmart+ customers for purchases as little as $35. Competitors like Amazon (AMZN -0.95%) offer free delivery to Amazon Prime subscribers who have made a purchase worth $100 on its fresh grocery service.

• Marketing might increase Walmart’s earnings. Walmart is a big player in the supermarket and discount retail industry, yet its annual margins are usually about 3% to 4%. The limited profit margin is due to the retail sector’s stiff competition. However, Walmart’s advertising division has exceptionally high profit margins that can expand significantly over the next few years. 

At a recent investor conference, Walmart’s chief financial officer, John Rainey, stated that the company’s advertising margins might be as high as 70% to 80% in the future. This is because marketers spend more on the company’s ad network as its e-commerce division expands. He asserted that in the next 5 years, the bulk of 

Walmart’s revenue will come from merchant’s online ads and fees. 

For context, Walmart’s online sales increased by 17% during the fourth quarter of 2023, but its advertising income increased by almost 20%.

Risks Associated With Investing in Walmart

Despite Walmart’s massive potential, always remember that investments are always risky. We have identified the main risks you should consider before buying Walmart Stock:

• It has little margin. Walmart’s poor margins, which are sometimes in the single digits, are one of the company’s major issues. Ideally, poor margins should not be an issue because the discount store frequently engages in price competition. But with the sector currently experiencing growing prices, the future might be challenging for Walmart if its profit margin reduces. 

Currently, a 4% profit margin is a success for the company. A decline in this figure will affect the company’s bottom line, resulting in less demand and stock value decline. 

• High inventory levels imply increased pressure on the bottom line. Walmart’s inventory levels are currently higher than in previous years. However, they are a cause for concern. Despite the management’s claims that it has improved inventory levels, there seems to be an issue that may result in higher-than-expected discounts. As a result, the company’s margins may be under more strain. 

For more clarity, Walmart may engage in more aggressive discounting this year to make room for seasonal merchandise. The business may need more clearance sales to achieve this.

• Walmart stock is expensive. The fact that Walmart’s stock is relatively pricey is another issue with it. Compared to its rival, Target, Walmart’s share price is high. The company’s projected price-to-earnings ratio is 22.6x, while investors are funding Target at 20.4x. Similarly, the average multiple for the S&P 500 is considerably lower, at 17.5x. 

A Walmart stock offers a significant reduction to its share price. The company’s recent announcement to include video streaming to the Walmart+ membership features will see it compete with Amazon. That may put pressure on its earnings and reduce the stock’s appeal to buyers. 

So, Walmart isn’t the best option at a time when many stocks are relatively cheap. Investors should consider other affordable stocks before opting for a Walmart stock since many cheaper options are available.

How To Buy Walmart Stock

Choosing a Brokerage

Below, we highlight the crucial points to consider when choosing a broker to buy Walmart stocks:

• Commissions.

• Account categories.

• Minimums for accounts.

• Dependability.

• Additional features and tools.

• Client Support.

Placing a Stock Order

When you place a stock order, your broker will either fill it from its inventory or connect it to an automated trading network. Whatever the case is, the transaction will be completed once the broker finds a seller matching your order.

There are many order types you can use when buying stocks, depending on your trading strategy. These include market, limit, and stop orders. With a market order, you can purchase a stock at the current best market price. A limit order gives you the chance to decide the price and date you want to buy a stock. A stop order is a risk-management order type that lets you quickly take your profits or put a cap on the losses you are willing to bear according to your risk tolerance. 

Monitoring Your Investment

Understanding Stock Performance

Understanding a stock’s performance is straightforward. Examine the stock’s performance over a given period. For instance, an asset’s 1-year history can give you a better picture of its performance. Examine the stock’s return by assessing its periodic averages, especially if you’re considering long-term investments.

When to Sell Your Stock

There is no perfect time to sell a stock, as investors’ goals vary. However, when your stock reaches 20% to 25% after it has broken out, grab the most of your earnings to increase your chances of making profits. You may also sell the entire investment if the market is turbulent and you are not accruing meaningful gains.

How to Invest in Walmart with Funds

Buying individual Walmart shares is one investment tactic, but there are other ways to invest in the company’s stock. A viable alternative to individual stock investing is buying index or exchange-traded funds (ETFs) that have Walmart in their portfolios. 

Investment funds have broader portfolios that sometimes include hundreds or thousands of stocks. So, investors perceive them as less risky than owning individual equities. Note that funds offer lower profit potential but provide steady long-term earnings.

Conclusion

Buying Walmart stocks can be profitable, as the company boasts of market stability and consistent annual revenue growth. However, it’s essential not to overlook the risk factors and downsides of investing in the stock. These include the high stock price and stiff market competition. Carefully evaluate all the pros and cons before committing funds to a Walmart stock.

FAQ

How Can I Purchase Walmart Stock?

Using an investing app or brokerage account is the most straightforward method of purchasing Walmart shares. Find a broker with low minimum investment requirements and trading fees if you don’t already have one.

Can I Buy Walmart Stock If I Work at Walmart?

With Walmart shares, direct investment is an alternative for those who wish to avoid the middlemen. Through the Computershare system, the corporation offers its equity to investors, including workers of Walmart.

Does Walmart Pay Dividends?

Walmart pays dividends to its shareholders. The retail giant has been doing so for over 50 years, offering a 1.46% dividend yield. However, Walmart’s dividend is lower than the 2.1% average for the consumer sector.

Are Walmart Shares a Good Buy?

Walmart is an established retail brand focused on expanding its market share. With more future growth, the company’s shares will increase in value and offer investors better profits. 

What is The Best Stock to Buy Right Now?

One of the top Fortune 500 stocks to buy now is UnitedHealth Group (NYSE: UNH). Others include Alphabet Inc., Microsoft Corporation, and Apple Inc.