After a full year of testing, Walmart [$WMT] is expanding its autonomous vehicle division with Gatik, its partner for deliveries in the state of Arkansas. It’s the latest in a string of unorthodox investments for the retail goliath and successful advancements in autonomous vehicles.
On Tuesday, Walmart declared it would expand its pilot program with Gatik’s self-driving trucks to operate a two-mile route between a distribution center and a Walmart store in Bentonville, Arkansas. In its pilot program, launched in July 2019, a safety driver accompanied the trucks. Now, with some 70,000 miles accounted for, the trucks will navigate this route without a driver present. Walmart also mentioned it would trial the technology in long distance delivery routes and try delivering customer orders to a designated location where consumers can pick up their orders. Those tests will start in 2021, with a safety driver at first.
Self-driving technology has been long awaited, and recent advances in the technology have shown promise. Tesla [$TSLA] rolled out what it calls a beta version of its proprietary self-driving software. And XPeng [$XPEV] exhibited its own self-driving software at an event in China a couple months back. Scoot Over Amazon, Walmart+ is Here
Investors are optimistic about the technology, as well. Two Lidar companies, Velodyne Lidar [$VLDR] and Luminar Technologies [$LAZR], have IPO’d in 2020. Lidar is laser-based radar and lidar sensors help computers to cautiously operate the vehicles. Shares of those two shops combined are worth more than $12 billion. Both are anticipated to bring in less than $200 million in sales for 2021.
Stock in automotive parts supplier Aptiv [$APTV] rose about 29% YTD, better than comparable returns of the S&P 500 and the Dow. While autonomous driving may not seem like it’s in Walmart’s purview, it could have key advantages for delivery purposes going forward—as well as potentially slanging its technology to other companies. Uber Unloads Self-Driving Unit to Aurora
Walmart’s bid to invest in social media app TikTok is an example of both. The company is looking to leverage its growing online presence while creating fresh streams of income, especially from faster-growth portions of its portfolio. The company’s rollout of its subscription service Walmart+ and its recent partnership with Shopify [$SHOP] are both moves that bring more of its business online and take aim at Amazon [$AMZN]. It has also seen its investment in Indian e-commerce from Flipkart work out well.
Furthermore, the company has been pivoting out of slower-growth business, while also expanding into both human and animal health. Anayst’s think advertising could even be an essential spark for the stock. In sum, these developments show that Walmart’s strategy mirrors Amazon in a way, as it’s moved beyond just retail and is more than willing to make investments—especially in technology—that could lead to new businesses with higher growth profiles than its stores. Viewed through this scope, self-driving vehicles fit within a larger narrative of Walmart’s push to reinvent itself.
So far so good, as the strategy looks to be working out. Walmart stock is up 23% YTD thanks to consumers loading up their pantries during the pandy. Still, shares trade for 25 times estimated 2021 earnings, a 20% premium to the S&P 500 PE ratio. In 2015, Walmart traded for 14 times estimated forward year earnings—a bargain to the S&P 500 ratio. Make no mistake, Walmart stock doesn’t trade like Amazon just yet. Amazon has traded for about 50 times estimated forward earnings since 2017. Uber v.s. Lyft During Covid