Wal-Mart Stores, Inc. (WMT)’s Massive Strengths and Weaknesses

Opportunties

Wal-Mart continues to expand internationally, which will be a key to raising earnings in the future.

The company cefinitely has room to grow online and strengthen its web business. Having all those physical locations is a huge asset here.

One thing that goes unnoticed is Wal-Mart’s desire to become a bank. Of course, all the “Too Big To Fail” banks employ massive numbers of lobbyists to prevent this from taking place (perhaps they fear for their overdraft fees?) but with the fairly recent introduction of financial services in Wal-Mart’s stores, this is a real possibility which I haven’t heard mentioned recently. Wal-Mart would likely cut the costs of banking (as is its model for business) and undoubtably find ways to market to the working poor and those without bank acounts, while also taking away a tremendous amount of business from other banks. Shareholders could be well-rewarded.

Threats

According to this Motley Fool column, sales for the start of February were a nightmare. This is thought to be a result of higher gas prices and the payroll tax adjusting upwards squeezing low income investors.

If Congress can’t agree on a budget to reverse the sequester, government cuts would likely have a disproportionate effect on the poor, much like analysts’ thoughts on the recent payroll tax readjustment.

Wal-Mart has a lot of competition at the low end of the market with Family Dollar Stores, Inc. (NYSE:FDO) and Target Corporation (NYSE:TGT), and it faces an increasing threat from Amazon online.

Amazon is taking over the online of world of retail. Despite being a Wal-Mart shareholder, I fulfill my orders through Amazon.com by a 4-1 ratio. And that’s as someone with a vested (albeit tiny) interest in shopping at walmart.com. Amazon owns the superiror brand name online.

Bottom Line

I’m long Wal-Mart, and have been for years. It might be a little dicey to get in at current level, but I’m not selling, either. And in the long term, it’s definitely a good buy. Just ask Warren Buffett.

The article Wal-Mart’s Massive Strengths and Weaknesses originally appeared on Fool.com and is written by Margie Nemcick-Cruz.

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