Opt for e-commerce over big-box names when it comes to retail, Tocqueville Asset Management’s John Petrides says.
Walmart’s better-than-expected fiscal third-quarter earnings weren’t enough to maintain the stock’s year-to-date gain, with the shares going negative for 2021 during Tuesday’s session. Rival Target‘s stock also fell following its Wednesday earnings beat.
Though Walmart CEO Doug McMillon called the company’s global business “underappreciated” and highlighted its digital sales growth abroad, it’s not the best e-commerce play out there, Petrides told CNBC’s “Trading Nation” on Tuesday.
“What we’re seeing through Walmart is that the U.S. consumer is quite strong and Walmart’s sales grew nicely, but the problem is inflationary costs and labor costs are crimping the bottom line,” the portfolio manager said.
“That is a hurdle for big-box retailers going forward,” he said. “You have to increase your e-commerce sales to survive and compete more effectively in the current environment.”
Petrides suggested looking into the Amplify Online Retail ETF (IBUY), a basket of 80 stocks at the forefront of e-commerce. Its top five holdings as of Tuesday were Newegg Commerce, The RealReal, BigCommerce Holdings, Airbnb and Etsy.
“E-commerce sales was clearly the big accelerator and the big beneficiary that came out of Covid,” Petrides said. “We’re trying to get back to our old normal, our old way of life, but again, with rising costs, I think the consumer, who is strong, is still going to find more value on the e-commerce side of things and that’s where we think more attraction is.”
At its current levels, Walmart’s stock didn’t seem worth buying to Inside Edge Capital Management founder Todd Gordon, either.
“I like it, but unfortunately I just can’t put it in our dividend value portfolio,” Gordon said in the same interview.
While he commended the company for not passing price increases onto its customers, the stock’s 1.5% dividend yield wasn’t enough to sell him on the stock.
“If you look at the chart, we might have some support a little bit lower, maybe around … $125-130,” Gordon said. “But … the S&P, yielding 1.25%, is making new highs on the year. From an opportunity cost, I can’t justify it.”
“There are better opportunities even if you want to put this name in sort of a value dividend portfolio,” Gordon said. “So for now, unless you’re against that trend line support, I say pass.”
Walmart shares ended trading Tuesday down over 2.5% at $143.17. The stock has fallen just shy of 1% for 2021.
Disclosure: Some Tocqueville Asset Management clients own shares of Walmart.
