2020 March, 19, 09:37:04 PM

Walmart Makes Run To All-time Highs Amid Coronavirus Market Plunge

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Walmart shares are emerging as a winner during the chaotic coronavirus crisis.

The big-box retailer, a classic defensive consumer staple stock, is benefiting from the millions of Americans stocking up on products for the unknown future. Plus, lower gas prices are relieving pressure from Walmart’s supply chain costs and potentially putting more money in the hands of the U.S. consumer if the coronavirus job losses can be contained.

“The unfortunate spread of the COVID-19 virus has created an unprecedented spike in demand for grocery and household products, as consumers prepare for weeks (maybe months) of school closures, work from home and restaurant closures,” Credit Suisse research analyst Seth Sigman said in a note to clients following his upgrade of the stock to outperform on Wednesday.

Stocks dropped violently in the past month on fears of the economic ramifications of the fast-spreading coronavirus. All three major averages are deep in a bear market, more than 20% off their most recent high, which happened to be on Feb. 19. Since then, the S&P 500 has cratered 25%, while Walmart’s stock is in the green, gaining 2%.

Walmart, which has a market value of about $348 billion, is a beneficiary of consumers flooding its stores and stocking up on household items, like toiler paper, cleaning supplies and food. The government has encouraged “social distancing,” leaving millions of American quarantined in their homes for the foreseeable future. While most restaurants, hotels and movie theaters are shut down, Walmart is busier than ever, a trend Credit Suisse expected to persist for 12 months. 

Walmart is “becoming more to the consumer, at the most important time,” said Sigman. 

Wallmart

Demand is making it hard for Walmart to keep its shelves stocked. The retailer has adjusted its store hours and created shopping times for seniors only.  Oppenheimer said this short-term shift in consumer spending could sustain Walmart’s same-store sales growth through the market turmoil. 

“We believe the company is well positioned to still deliver on financial targets,” Oppenheimer analyst Rupesh Parikh told clients while upgrading the stock to buy. 

It’s up for debate whether Walmart’s popularity and outperformance will continue after the pandemic crisis is a thing of the past. 

“What happens when we get through this? Do we look at the companies that have the clean balance sheets that are the winners ... I mean is Walmart going to be the nation’s retailer?” asked CNBC’s Jim Cramer on “Squawk on the Street” on Thursday. 

For Credit Suisse, Walmart isn’t just a short-term play here. The firm said it expects this unfortunate period to accelerate “structural changes in consumer shopping,” for five or more years, as people are introduced to new shopping methods like online grocery and curbside pickup.

“This change should be sticky, and favor WMT, as it’s invested in its infrastructure, technology and people, to evolve its model,” Sigman added. “Bottom line, WMT is well positioned to serve the consumer through this difficult period as well as on the other side, as the customer acquisition benefits compound.”

(CNBC’s Michael Bloom)

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