By Sabrina Escobar
It isn't often that a retailer commands a higher market value than a member of the Magnificent Seven. But on Thursday, as Tesla stock fell for its fifth consecutive day, Walmart was giving the electric vehicle manufacturer a run for its money.
With Tesla stock down 3.3% in early afternoon trading and Walmart dipping 0.5%, both companies were vying for a spot as the 12th largest U.S. company by market capitalization, according to Dow Jones Market Data.
Based on preliminary values as of late Thursday morning, Tesla's market capitalization sat at about $482.9 billion, paring some losses from earlier in the day. Walmart's market cap was about $481 billion.
If Walmart wins out, it would be the first time the retailer's market value outstripped Tesla's since January 2023. That's not an insignificant feat, given that it wasn't too long ago that Tesla held a fifth-place spot in the list of largest U.S. companies. Microsoft, Apple, and Nvidia were the top three companies.
Yet one look at both companies' stock performance over the past couple of months tells you all you need to know about how -- and why -- Walmart may soon be usurping Tesla's spot. Tesla shares are off close to 40% this year, while Walmart has gained almost 14%. The S&P 500 is up 5.7%.
The past few months have been bumpy ones for Tesla. Demand for its EVs has slowed, bringing down the company's sales growth, delivery volumes, and profit margins. Earlier this week, Tesla said it was laying off more than 10% of its global workforce.
Walmart, on the flip side, is thriving. The company has grown sales by a compound annual growth rate of 4.7% over the past five years; earnings per share have come up by 20.5% in the same time span, according to FactSet. Earlier this year, the company announced a stock split and plans to open 150 new stores.
Higher inflation and interest rates have driven many Americans toward value-focused retailers such as Walmart as they look to stretch their budgets further. As a result, Walmart has been steadily gaining market share, especially among higher-income households. In the company's latest quarter, two-thirds of the market share gains Walmart saw in general merchandise categories came from households making more than $100,000 a year.
The company is also reaping the benefits of its investments in alternative revenue streams, such as its advertising and marketplace businesses, which can carry higher margins than the company's traditional grocery business.
"As we have these faster-growing, higher-margin parts of our business like advertising, that are contributing to an outsize part of our portfolio," said John David Rainey, Walmart's chief financial officer, on a call with investors in February. "So we should expect to see some improvement in gross profit."
Walmart's investments in technology are paying off as well, something that Barron's noted when we recommended the stock last July. Shares have risen 16% since then.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 18, 2024 13:40 ET (17:40 GMT)
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