Scott R. Grossman
Founder of Vindico Capital, Consumer-Sector Investor
Walmart is arguably more exposed than its safe-haven history suggests, because its edge rests on competing with Amazon, and doing that clearly will require far more capital. Historically it has been a place to hide, but that does not mean owning or shorting it; it is simply a stock to avoid. x.com x.comÂ
Walmart's 41x P/E looks hard to justify when gas prices are going through the roof. x.comÂ
Walmart works only as a funding short, best paired against a long in Amazon. Over 10 years Walmart will obviously outperform T-bills, since its return on capital and market positioning are too good. Shorting it doesn't really derisk a long, and in a recession the pair would probably do worse than simply buying Amazon with debt. x.comÂ
Walmart has the strongest fundamentals in retail, with $725B+ of revenue, exploding e-commerce and market-share gains while rivals bleed. It is a defensive cash-printing machine in a shaky economy, and analysts rate it a moderate buy with $140+ targets. x.comÂ
Walmart is a great company at a terrible price, trading near 38 times forward earnings while growth slows. Revenue and EPS beat, yet US comparable sales growth slowed to 2.6%, the weakest in six years, and the stock fell. Even after another 10% drop, it is not worth buying. x.comÂ
Amazon's retail business makes it an unattractive way to own ANT exposure now that hyperscalers are no longer necessary for it. x.comÂ
Walmart keeps compounding through recessions because people never stop eating in bad years; they buy more chicken and less filet, and Walmart sells the chicken. It compounded through the 2001, 2008 and 2020 recessions. Wealth comes from finding a business that never has a truly bad year, not from moonshots. x.comÂ
Walmart's 43.28x earnings multiple makes the stock impossible to buy for a long time. Its historical median is 31.13x, and even at 30x it would not be attractive. x.comÂ
Amazon's weak retail growth has shaken the earlier buy case. Online-store sales rose just 2% year over year, and the retail numbers look so poor that it is no longer clear at what price the shares are a buy. x.com x.com x.comÂ
Walmart may be setting up for a big bounce, with its pullback matching the pattern of its last two bottoms. The stock is down about 25% from its all-time high, as it was before both prior bottoms, which also showed RSI divergence. Its forward P/E has fallen from near 40 earlier this year to a more respectable 31, and it is holding just above the psychological $100 level near a prior breakout area. x.comÂ
Walmart is being pumped like a new dot-com company, but its high P/E will need to be matched by revenue growth, which investors will soon realize. x.comÂ
