Original title: Morgan Stanley's favorite established retail stocks are also tomorrow's technology superstars? Source: China Finance Online Co Ltd website
Although current prices and valuations are somewhat prohibitive, if you go back to 10 years ago, the technology growth stock would have been the stock that everyone would have bought without hesitation. What some analysts and investors have been doing in recent years has been "looking for the next tech growth stock". Many streaming media stocks and technology stocks have entered people's field of vision.
But, unexpectedly, Morgan Stanley, a prominent Wall Street investment bank, said WMT, a hypermarket retailer, was expected to be "the next technology stock".
The Wall Street firm rated Walmart Inc as overweight. The investment bank said it expected the stock to continue to rise because of its bullish outlook for Walmart Inc +, which Walmart+, plans to compete with Amazon.Com Inc Prime in its e-commerce business.
"companies with subscription models such as Amazon.Com Inc (AMZN), Costco (COST), Netflix (NFLX) and Spotify (SPOT) have higher multiples than Walmart Inc, so Walmart+ opens the door to higher multiples," Morgan Stanley equity analyst Simeon Gutman told clients on Monday.
Walmart Inc's share price soared nearly 10% in 2020, while the market was hit by the recession caused by the coronavirus. The supermarket retailer has benefited from the benefits of millions of Americans hoarding food and household items during a government shutdown.
Last week, Walmart Inc's stock rose again when Vox's Recode reported that Walmart Inc planned to launch a subscription service called Walmart+ in July. According to Recode, this is Walmart Inc's response to Amazon.Com Inc Prime, which plans to spend $98 a year and includes delivery on the same day of purchase, gas discounts at Walmart Inc gas stations and other privileges.
"Walmart Inc seems highly likely to attract new members and keep them," Gutman said. "if Walmart Inc succeeds in this matter, it is similar to Amazon.Com Inc's success in attracting new customers / retaining old customers. It will also have a strong impact on customers' lifetime value and long-term profitability."
Gutman also points out that in terms of valuation multiples, shares of technology companies and e-retailers tend to trade at higher prices than the average retailer.
"the subscription model may change Walmart Inc's entire future layout, allowing him to invest more freely in the business and earn higher valuation multiples," Gutman said.
Morgan Stanley also said that Walmart Inc's launch of "Walmart+" will not cause the company to lower its profit guidance from medium to single digits of profit growth.
"the company has demonstrated its ability to balance investment and growth through cost productivity efforts," Gutman added.
Morgan Stanley's target price for Walmart Inc is $140a share, meaning it has the potential to rise by more than 6 per cent from its current level.