Wal-Mart Acquires Parcel to Expand Same-Day Deliveries

Following the successful acquisition of Whole Foods Markets by Amazon, the stock of Wal-Mart Stores, Inc. (NYSE: WMT) turned weak in August. The markets expect a fierce competition in the grocery sector and given the manner in which Amazon can hurt its competitors, investors turned away from Wal-Mart. That has resulted in a 5% erosion in the stock price so far. However, Wal-Mart, with its deep pockets, is working out to take Amazon’s competition head-on. In this regard, there are some positive developments which may push the stock price of Wal-Mart in the near future.

Last Tuesday, Wal-Mart announced that it has acquired Parcel Inc, a Brooklyn, New York-based last-mile delivery startup that serves online retailers such as Bonobos (acquired for $310 million by Wal-Mart last year), Martha & Marley Spoon, and Chef’d. The acquisition was done to compete with Amazon in a more effective manner and expand its same-day shipping service in the New York City area.

Parcel, which operates on a 24/7 basis, is renowned for deliveries on the same-day and in scheduled two-hour windows. The company uses a custom built routing algorithm for speeding up deliveries. Wal-Mart clarified that the acquisition will not stop Parcel from serving its current clients.

With the successful acquisition of Parcel for an undisclosed sum, Wal-Mart plans to increase the number of same-day offerings for both Jet.com and Wal-Mart.com in New York City. Using a single service for delivery will also enable Wal-Mart to trim costs.

Jet.com, which was acquired by Wal-Mart for $3 billion last year, is also doing the groundwork to launch a private-label brand. The eCommerce website also has plans to introduce about 60 food and other household items in the months ahead. The products, which includes coffee, laundry detergent, olive oil, cereals and paper towels, would be sold under the label Uniquely J. Notably, the products offered by Jet.com can be bought only on its website during the first year and would be of very high quality. From the second year onwards, the products can be bought from Wal-Mart.com. The market is expected to react positively to the news in the days ahead.

The price chart reveals that the stock has bounced off a strong support at 78. Furthermore, a bullish reversal is also confirmed by the crossover of the momentum indicator above the reading of 100. The stock is also trading above its 50-period simple moving average. Thus, we forecast a short-term uptrend in the stock.

Walmart - Technical Analysis - 9th October 2017

To gain from the uptrend, we are considering investing in a high or above option. The option should be active until October 17th. Additionally, the contract will be taken when the stock trades near $79 in the NYSE.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.