Walmart stock (WMT)
“WMT stock has underperformed many peers since COVID began, owing to the fact that it has not reaped nearly as many benefits from the pandemic,” Kelly wrote in a note Thursday. ”[W]e see a potential inflection in this stumbling name.”
“WMT did not receive a COVID award. It lost market share in consumables to local grocers as consumers valued convenience, quality, and selection over price. WMT’s reduced hours didn’t help either, according to Kelly.
However, as consumers resume pre-pandemic behaviors and life returns to normal, Wells Fargo believes Walmart will reclaim market share. In fact, the retailer’s market share began to shift in the first quarter of 2021.
While expiring pandemic-related stimulus and rising prices pose challenges for Walmart, the company claims that child-tax payments and recent wage increases will benefit lower-income customers.
“Consumer cross currents are growing, but we continue to support exposure to the lower end,” Kelly said.
Furthermore, due to its size and price leadership, Walmart is well-positioned to combat inflationary pressures, according to Wells Fargo. In addition, the company increased wages proactively in 2021.
According to Wells Fargo, Walmart initiatives such as Walmart+, digital ads, clinics, and fintech provide additional “underappreciated” opportunities for the company to add value.
According to the firm, by 2030, 30 percent of all cars sold globally will be electric vehicles, up from 3 percent in 2020. Morningstar predicts that by 2025, EVs will be cheaper and perform on par with internal combustion, traditional vehicles.
According to the report, EV adoption will skyrocket in the second half of this decade as charging infrastructure is built across China, Europe, and the United States.
“Automakers are announcing significant increases to their long-term EV portfolios, and EV mix will grow over the long term to at or near 100 percent of industry sales,” wrote Morningstar equity analyst Seth Goldstein.
In a July 27 note, he wrote, “This massive growth creates potential investment opportunities throughout the EV supply chain.”
The future belongs to electric vehicles. However, there are four traditional automakers who could be winners.
Analysts at Piper Sandler believe Tesla’s stock can rise nearly 70% in the next year.
From electric vehicles to hydrogen, BofA has named the global stocks to trade in an emerging $2 trillion market.
Tesla, the world’s leading electric vehicle manufacturer, was named by Goldstein as one of the automakers best positioned to capitalize on the sector’s rapid growth. The other four Morningstar picks were all traditional automakers:
This German automaker manufactures luxury passenger vehicles such as BMW, Mini, and Rolls-Royce.
According to Morningstar, it also has 14 “electrified” models, which accounted for 8% of its total sales volume last year.
BMW intends to have 25 such models by 2025, 12 of which will be EVs and 13 of which will be plug-in hybrids — vehicles that run on both electricity and fossil fuels.
BMW has set a target of having EVs account for 50% of its global sales volume by 2030.
After previously focusing on hybrid models, this American company is now focusing on EVs.
According to Goldstein, Ford’s Mustang Mach-E “looks like a real competitor to a Tesla Model Y.”
“The launch of the F-150 Lightning, an EV version of Ford’s most profitable vehicle platform, in 2022 demonstrates Ford’s commitment to EVs,” he added.
3. General Motors, Inc.
This year, the American automaker stated that by 2035, it intends to sell only zero-emission vehicles.
General Motors also intends to invest $35 billion in EV and autonomous vehicle development over the next five years. It intends to launch 30 EVs by the end of 2025, with a target of 1 million EV sales per year.
According to Goldstein, it also sells its proprietary battery technology to other car companies such as Honda.
According to Morningstar, EVs will account for 3% of the German automaker’s 2020 sales.
According to Morningstar’s Goldstein, Volkswagen will spend 46 billion euros over the next five years to “electrify” its vehicle portfolio.
Goldman’s buying strategy
The firm raised its S&P 500 year-end price target to 4,700 from 4,300 on Thursday, citing strong corporate earnings and low interest rates. It also advised investors to balance long-term secular growth positions with shorter-term cyclical stocks.
“Decelerating GDP growth and low interest rates should support the continued outperformance of fast-growing companies with high profit margins,” Goldman’s David Kostin wrote in a note released Thursday.
Goldman identified 38 Russell 1000 stocks in virus-exposed industries that demonstrated strong sales growth and profit margins in the two years preceding the pandemic, including Etsy, Starbucks, and Sherwin Williams. According to consensus analyst forecasts, the firm expects them to maintain that growth and profitability over the next two years.
Here are Goldman’s top ten short-term strategy picks:
When Etsy reported earnings on Wednesday, the company provided guidance indicating a lull in the pandemic-fueled e-commerce boom, which led to a drop in the company’s stock on Thursday. Nonetheless, the online arts and crafts marketplace outperformed analysts in both earnings and revenue.
Etsy’s sales and profit margins are expected to grow by 20% in 2022, according to Goldman Sachs.
“In the short term,” Kostin said of the stock picks, “we believe the market’s pessimism regarding the Delta variant has created an opportunity in some virus-exposed cyclicals.”
Kostin used the firm’s general basket of reopening stocks as an example, noting that it “has declined in absolute terms by 15% and lagged the S&P 500 by 20% since May as investors have downgraded economic growth expectations.
Estee Lauder, a beauty and cosmetics company, is also among Goldman’s picks for 2022, with a 12 percent increase in sales and a 15 percent increase in profit margins.
Starbucks’ sales are expected to increase by 10% in 2022, with margins increasing by 14%. Earlier this summer, the coffee and retail behemoth began to see a rebound in business in areas where vaccination rates were increasing.
Sherwin-Williams could see a 6% increase in sales and a 13% increase in margins in 2022.