Market Overview

Morgan Stanley: Walmart's Slowing E-Commerce Growth Is Cause For Concern

Share:
Morgan Stanley: Walmart's Slowing E-Commerce Growth Is Cause For Concern
Related WMT
Pot Stocks, ETFs, Top News And Data From The Cannabis Industry This Week
Food Supply Chains Need An Economic Incentive To Adopt Blockchain
Instacart Gets $600M At $7.6B Valuation; SoftBank Bets On Brazil (Seeking Alpha)

Walmart Inc (NYSE: WMT) has made some major strides in beefing up its online sales business to compete with Amazon.com, Inc. (NASDAQ: AMZN). However, Walmart's most recent quarterly earnings report suggests the company still has plenty of improvement to make, and one Wall Street analyst said Monday that Walmart has a lot to learn from Amazon.

The Analyst

Morgan Stanley analyst Simeon Gutman reiterated an Equal-weight rating for Walmart and reduced the price target from $106 to $99.

The Thesis

Walmart lost business during the holiday shopping season because its online infrastructure wasn’t equipped to handle peak demand, Gutman said. (See the analyst's track record here.) 

“WMT's execution issue suggests 1) its infrastructure is inadequate or 2) it has yet to harmonize its omni-channel assets (3,600 Supercenters, 22 e-commerce dedicated FCs), particularly during peak demand season." 

Amazon had a similar problem back in the fourth quarter of 2015. In that quarter, Fulfilled By Amazon centers reached full capacity, which resulted in higher labor costs, slower deliveries and lost business, according to Morgan Stanley. 

As a result, Amazon beefed up its fulfillment center infrastructure by roughly 50 percent over the following two years. Walmart’s issue doesn’t seem to be capacity, but rather mismanagement during peak demand periods, Gutman said. 

Regardless of whether the issue was capacity or management, Gutman said spending money is the key to solving the problem for Walmart. The Bentonville, Arkansas-based retailer needs to beef up its software and/or logistics and/or fulfillment center capacity to avoid repeating the online sales slowdown it reported last quarter, the analyst said. 

Price Action

Walmart stock traded was down 0.25 pecent at $92.64 in Monday morning trading and is down 12.8 percent in the past month.

Related Links:

Analysts Defend Walmart's Quarter

Walmart, Target Are Susquehanna's Top Picks Ahead Of Retail Earnings Season

Latest Ratings for WMT

DateFirmActionFromTo
Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Oct 2018Deutsche BankUpgradesHoldBuy
Oct 2018JP MorganMaintainsNeutralNeutral

View More Analyst Ratings for WMT
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Simeon GutmanAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + WMT)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
AAPLWedbushInitiates Coverage On310.0
DHTJP MorganUpgrades0.0
DISBarclaysUpgrades130.0
DXCMGoldman SachsUpgrades125.0
ORLYJP MorganUpgrades398.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Day Market Update: Dow Climbs Over 200 Points; NXT-ID Shares Gain Following Agreement with Discovery Financial Services

CNBC's Contessa Brewer Looks For 'The Story Of People' In Financial News