Seven years ago, mega-retailer Walmart (WMT) took the first step in its plan to topple e-commerce giant Amazon (AMZN)... Walmart realized that it couldn't do it alone. So in August 2016, it spent $3.3 billion to buy Jet.com.
America's Legacy Retail Leader Is Underperforming
By Vic Lederman, editorial director, Chaikin Analytics
Seven years ago, mega-retailer Walmart (WMT) took the first step in its plan to topple e-commerce giant Amazon (AMZN)...
Walmart realized that it couldn't do it alone. So in August 2016, it spent $3.3 billion to buy Jet.com.
At the time, Jet.com was a burgeoning e-commerce startup. And it offered the only real competition Amazon had seen...
Jet.com started in 2014 with a testing period for a select group of people. The idea quickly took off. By mid-2015, the company offered roughly 4.5 million products on its website.
I was living in the heart of Silicon Valley back then. Jet.com was serious enough that my tech-worker roommates started to buy things from it.
Again, the Walmart deal happened in 2016. Amazon was still solidifying its rise to power.
In fact, even in the tech-loving world of Silicon Valley, some of my friends believed my "Prime" membership was a novelty. They thought I was crazy for paying for the service.
But as we all know now, the lure of "free shipping" from Amazon proved to be too great for many millions of people across the U.S. This shift happened relatively fast, too.
And as I'll explain today, Walmart's attempt to overthrow Amazon in e-commerce isn't enough to save the stock in the Power Gauge...
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Amazon started charging for its Prime service in 2005. By January 2016, a little more than a decade later, reports said that nearly half of all U.S. households had a Prime membership.
So by the time Walmart bought Jet.com seven months later... it was woefully behind.
Amazon had already emerged as the leader in the e-commerce space. And even as the biggest brick-and-mortar retailer in the U.S., Walmart knew it could take years to catch up.
But while announcing the Jet.com deal, Walmart President and CEO Doug McMillon made his intentions clear...
We're looking for ways to lower prices, broaden our assortment, and offer the simplest, easiest shopping experience because that's what our customers want.
We believe the acquisition of Jet accelerates our progress across these priorities... It's another jolt of entrepreneurial spirit being injected into Walmart.
In other words... Walmart set its sights on surpassing Amazon.
McMillon's promise made the $3.3 billion deal for Jet.com more than worth it to Walmart. It set the company on a path to e-commerce growth. And it has worked – to an extent...
Walmart has soared from almost no presence in the U.S. e-commerce market in 2016 to the No. 2 spot today. The company now holds more than 6% of the space. That puts it well ahead of other major retailers like Target (TGT), Home Depot (HD), and Best Buy (BBY).
But it's a long path to the No. 1 spot...
Amazon is still the runaway leader. It controls roughly 38% of the U.S. e-commerce market.
That makes Walmart's dilemma all too clear...
Folks, Walmart is still a legacy retail business trying to catch up with the e-commerce pioneer on its own turf.
The Power Gauge isn't so impressed with the company, either...
Our system has given Walmart a "neutral" or worse rating for most of the past year. And in the chart below, take a look at the stock's weak relative strength versus the S&P 500 Index across that same time frame...
This shows us that Walmart is underperforming the broad market. And over the past three months, the difference is extreme. The S&P 500 soared about 10% in that time frame. Meanwhile, Walmart's stock is roughly flat.
Further out, Walmart has also underperformed the S&P over the past year... and over the past five years.
Folks, the takeaway is simple...
Walmart is lagging the market. So unless the Power Gauge gives it a full-tilt "very bullish" rating... I'll be watching this stock from a distance.
Good investing,
Vic Lederman
P.S. It's fair to say that Walmart hates its second-place position in e-commerce...
As such, it's taking a second step in its plan to catch up to – and eventually pass – Amazon. Put simply, this strategic partnership could transform Walmart's e-commerce business. But as we explained in the December issue of the Power Gauge Report, it will transform the company we just recommended last month.
Find out how to get immediate access to this recommendation – and the entire Power Gauge Report portfolio – right here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.540%
13
15
2
S&P 500
+0.890%
152
258
88
Nasdaq
+1.420%
46
36
17
Small Caps
+0.600%
651
916
349
Bonds
-0.930%
Information Technology
+2.010%
41
22
1
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+2.09%
Communication
+0.52%
Industrials
-0.36%
Staples
-0.43%
Financial
-0.93%
Health Care
-1.06%
Materials
-1.46%
Discretionary
-1.62%
Energy
-2.30%
Real Estate
-2.32%
Utilities
-3.02%
* * * *
Top Movers
Gainers
FAST
+7.18%
AAL
+6.88%
LUV
+6.83%
CZR
+5.30%
UAL
+4.99%
Losers
DFS
-10.80%
HUM
-7.99%
KEY
-4.62%
CVS
-4.04%
SNPS
-2.66%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
FITB, HBAN, RF, TRV
ZION
HAL, PEP, SLB
BKR
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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