3 Expert Takes On Walmart's New Subscription Service: 'Godzilla Vs. King Kong'
Retail giant Walmart Inc (NYSE: WM) is reportedly set to launch a new $98-a-year subscription service platform, Walmart+, and it can be considered both a defensive and offensive strategy, according to Oppenheimer analyst Rupesh Parikh.
Parikh Sees Pushback Against Amazon
Walmart's service could be seen as a defensive move against rival Amazon.com, Inc. (NASDAQ: AMZN) after it launched a two-hour delivery option late last year, Parikh said on CNBC's "Fast Money."
Walmart's new subscription platform should help it better compete against Amazon on this front, the analyst said.
From an offensive perspective, Walmart's subscription platform should be able to steal market share away from rivals like Target Corporation (NYSE: TGT) and Kroger Co (NYSE: KR) on the grocery front, he said.
Investors may have concerns with the potential costs associated with Walmart's subscription, which may even include a video entertainment offering, Parikh said.
But for the time, the details of parts of the service are unclear, especially in video, the analyst said.
Walmart could partner with another party instead of investing billions of dollars of its own in content, he said.
Walmart's stock is trading near a historical all-time high valuation in the mid-20s on a P/E basis, Parikh said. The case for incremental valuation expansion would be justified if Walmart's subscription service captures a greater share of customer wallets, he said.
Retail Exec On 'Battle Of The Century'
Walmart taking on Amazon is the "battle of the century" in the retail sector, as it pits "Godzilla versus King Kong," former Toys R Us CEO Gerald Storch said on Fox Business.
Walmart is the clear dominant in-store retail leader, and Amazon can never catch up, Storch said. But Amazon's online presence is eight to 10 times larger, and Walmart can't keep up, he said — with the exception of groceries.
Even with the launch of a subscription platform, Walmart is at a major disadvantage, as the only products it can sell are those found mostly in its stores, he said.
Amazon has a larger assortment of products that it can deliver at a faster speed, Storch said.
Walmart's new platform will ultimately result in market share gain in groceries, but not in categories like hardlines and apparel, in his view.
Verishop CEO: Service 'Makes Sense' For Walmart
Prior to the COVID-19 outbreak, e-commerce sales accounted for 15% of the total U.S. retail market, and this figure should soar to 50% to 60% over the next decade, Verishop co-founder and CEO Imran Khan said on CNBC's "Closing Bell." The math behind the projection suggests $1 trillion in spending will shift online over the years, so it "makes sense" for Walmart to make a greater push into the online category, he said.
Walmart is likely to emphasize convenience, and Khan said this is a "very important factor" to attract customers.
Related Links:
This Day In Market History: Sam Walton Opens The First Walmart
Walmart Stops Display Of Mississippi Flag In Stores Over Confederate Flag Emblem Issue
Photo courtesy of Walmart.
Latest Ratings for WMT
Jun 2020 | Guggenheim | Maintains | Buy | |
Jun 2020 | UBS | Upgrades | Neutral | Buy |
May 2020 | Morgan Stanley | Maintains | Overweight |
View More Analyst Ratings for WMT
View the Latest Analyst Ratings
See more from Benzinga
Beyond Meat's Stock Gains After Launching Affordable 'Cookout Classic' Line
Making Sense Of Why Consumers Are Switching Their Grocery Store Habits
Making Sense Of Walmart's Decision To Close Jet.com: 'Mission Accomplished'
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.