Cramer has frequently discussed Walmart Inc. (NASDAQ:WMT) and Target Corporation (NYSE:TGT) in a group over the past month or so. The CNBC TV host has been clear that Target has been performing well. He has also fluctuated between advising viewers to hold off on Walmart to wondering whether the firm was worth buying in a tight economy. In his morning appearance on October 2nd, Cramer warmed up to Walmart due to its exposure to consumer spending.
“. . .is this suddenly a Walmart market. . .where you want to be able to buy something where people would go to the store. . .I would try to be as surgical as possible. And the reason I mentioned Walmart is that it’s down huge and that might be something. You could say you still don’t have wage growth but you still have employment growth. That means Walmart. And I think the stock is down a great deal.
“I guess the better one is Target. I think that Target is going to have a very good quarter.”
Neither Walmart nor Target is part of our list of 10 Blue Chip Stocks Jim Cramer is Crazy About. But one of them has made it to the list of 10 Best Dividend Kings To Buy According to Hedge Funds.
Even as Cramer warms up on Walmart in a tough economy, the firm’s second quarter also saw it bear the brunt of the slowdown. During the quarter, Walmart’s comparable sales grew by 2.6%, which was the slowest growth in nearly five years and missed analyst estimates of 3.7%. Management warned about higher fuel prices in particular and shared that it expected a $10 billion headwind from them in the fiscal year 2027. However, the silver lining came in the form of Walmart’s advertising business, which grew its revenue by 38% to significantly outpace the broader revenue growth of a modest 5.9%. Consequently, on the bullish front, Walmart can significantly grow its margins through its advertising business as its traditional business contends with the high costs. Yet, the deceleration in its revenue might not be fully compensated, especially since the firm has guided Q3 revenue growth to range between 3% to 3.75% compared to Q2’s 5.9% revenue growth.
As for Cramer, he has also added that Walmart might be deliberately holding off on raising prices in order to retain customer loyalty. We analyzed his remarks in line with management’s comments as part of our coverage of Jim Cramer Discussed Walmart Inc. (WMT)’s Strategy To Navigate Through Current Slump.
Shifting to Target, the CNBC TV host has been more bullish. Target’s growth figures during its second quarter are roughly similar to Walmart’s. The firm grew its revenue by 5.3%, while comparable sales, digital sales and non-merchandise revenue grew by 3.8%, 8.7% and 20%. However, Target is also dealing with consumer headwinds as it tightened its full year comparable same store sales outlook to range between 0% and 2%. Over the past year, Target has initiated more than 10,000 price cuts to gain market share, which appears to have translated into comparable sales growth beating Walmart and fueling Cramer’s optimism. Yet, with the shares up by more than 50% year-to-date, any slowdown in growth could create headwinds.
Looking at the valuation, Target’s forward P/E ratio of 15.62 is more than half of Walmart’s 38. The lower ratio indicates that even though Walmart has struggled, investors appear to be willing to hold the share price at higher levels on growth expectations, while similar expectations for Target might be behind it. The latter argument is helped by the fact that in April, Target’s forward P/E was higher at 16x. Walmart’s defensive premium might also be playing a role. As for the hedge funds, 111 funds disclosed a stake in Walmart in Q2, while the figure was 63 for Target – a fact that supports the higher forward P/E for the former.
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