Walmart stock price is firing on all cylinders: could it hit $1 trillion?

Walmart (WMT) stock price is doing well this year, and is one of the best-performing companies in the United States. It has jumped by 73% this year, bringing its market cap to over $733 billion, making it substantially bigger than companies like Costco and Home Depot. 

Walmart stock helped by strong growth

The WMT share price surge has been propelled by its strong revenue over the years and the fact that it is gaining market share in other sectors. 

Walmart’s annual revenue has jumped from over $523 billion in 2019 to over $648 billion in the last financial year. 

This growth happened because Walmart is often seen as an all-weather company because of its strategy. In most periods, the company’s products are often cheaper than other retailers. Also, Walmart has a wide variety of products, a great rewards program, and has locations across the country. 

Walmart has also been helped by its investments in e-commerce, which has helped make it become available to most people. 

Most importantly, it has become a more profitable company. Just last year, its net profit jumped to over $15.5 billion. It has used these funds to pay its shareholders dividends, which has made it a dividend king after making payouts for 50 years. Walmart has room to grow its dividends because it has a payout ratio of just 33%.

Read more: Is it too late to invest in Walmart stock as it hits a record high? here’s what experts are saying

In addition to dividends, the company has been slashing its outstanding shares. Its total outstanding shares fell from 8.50 billion in 2020 to 8.03 billion, a trend that will continue in the near term.

Walmart has continued to gain market share across other industries. For example, analysts believe that the company is partly to blame for the crisis going on in firms like Walgreens Boots Alliance and CVS Health.

The most recent financial results showed that Walmart’s revenue rose by 5.5% to over $169 billion, higher than what analysts were expecting. Its margins rose by 21 basis points, while its global e-commerce volume jumped by 27%.

Walmart has also become a major player in the advertising industry, where its customers market on its stores and website. 

Can WMT’s market cap hit $1 trillion?

The $1 trillion club has grown rapidly in the past few months, with the number of firms with that valuation jumping to 9 or 10, with Bitcoin included. 

Walmart is the 12th biggest company globally with a market cap of $733 billion, meaning that its stock needs to rise by 27% to hit that valuation. This means that the WMT share price needs to get to $115.95. 

Such a move is possible if the company continues delivering strong results as it has done in the past few years. However, the biggest concern for Walmart has always been its valuation since the firm makes a net profit of less than $20 billion a year. If it averages $20 billion a year, its total profit in the next 20 years will be about $400 billion.

These numbers mean that Walmart has a forward P/E ratio of 36, meaning that all factors were constant, it would take these years to break even if you bought it. It also trades at a forward EV-to-EBITDA multiple of 26, higher than the industry median of 15. 

Read more: Why is Target losing to Walmart, and will it ever catch up?

Walmart stock price analysis

The weekly chart shows that the WMT share price has been in a strong bull run in the past decades. It has recently crossed the important resistance level at $90 as buyers target the key resistance point at $100. 

The stock remains much higher than the 50-week and 200-week moving averages. Also, the Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the extremely overbought level.

Therefore, the stock will likely continue rising as bulls target the key resistance level at $115, when will it gets to a $1 trillion company. However, there is a risk that the stock could suffer a slight retreat as investors start to take profits. In the long term, though, the stock will continue doing well because of its role in the US.

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