Walmart Inc. (NASDAQ:WMT) has opened a fulfillment center of more than 900,000 square feet in Stockton, California. The site uses automation and machine learning to cut the usual 12-step order process down to five. It will also employ about 1,000 people. The company says its next-generation fulfillment centers, of which Stockton is the fifth, will enable it to reach 95% of the U.S. population with next-day or two-day shipping when combined with the rest of its network. The stock closed more than 2% higher on October 8, its fourth straight gain. Beyond its push for faster delivery, Walmart’s defensive appeal remains a key attraction for investors. But which other companies joined WMT on our list of the 10 Best Bear Market Stocks to Invest In Right Now?
Automation Is Changing Walmart’s Business
I believe Stockton is just one piece of a much bigger shift. Walmart’s U.S. e-commerce sales have grown more than 20% for 10 straight quarters, and fast deliveries jumped 48% last quarter. CFO John David Rainey said much of Walmart’s recent spending has gone into supply chain automation and speed. That spending is also lifting higher-margin businesses. Advertising rose 38% last quarter, and membership fee revenue hit a record. Faster delivery brings more shoppers online, which feeds those businesses.
Still, Walmart remains a retailer at heart. Its stock fell 9% after its August report, despite beating estimates and raising its outlook. The decline reflected slow comparable sales and a soft Q3 guide, with operating income expected to grow just 2% to 4% as Walmart puts tariff refunds back into lower prices. Walmart’s short-term margin pressure hasn’t stopped hedge funds from backing the retail giant. See why WMT ranks No. 3 among the 10 Best Dividend Kings to Buy According to Hedge Funds and which other stocks made the list?
Walmart Costs More Than Amazon
Walmart’s stock trades at a premium to its historical norms. The forward non-GAAP P/E of 37.48x sits about 24% above its 5-year average. That’s even higher than Amazon, which trades at about 31x despite also owning AWS, a fast-growing, high-margin cloud business. The forward Price-to-sales ratio of 1.14x is also about 28% above its average. Yet analysts expect EPS to grow only 9% this fiscal year, about 12% in each of the next two, and 7% in fiscal 2030. Even based on fiscal 2030 earnings, the P/E would be around 28x. As of July 31, Walmart carried approximately $38.9 billion in net debt, excluding lease obligations. In my view, the automation story is big, but the stock already prices in a lot of it.
Hedge fund interest in Walmart is rising. Funds holding the stock rose from 99 in Q1 to 111 in Q2, while their stakes edged up from $10.9 billion to $11.1 billion.
Stockton shows Walmart is building a faster, more efficient business. At nearly 38 times earnings with about 10% annual growth, though, I’d wait for a better entry point.
While we acknowledge the risk and potential of WMT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WMT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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