This deal looks really exciting! The American retail giant Walmart (WKN: 860853) has now entered into an agreement to take over the streaming service from Paramount Global (NASDAQ:WKN) as part of its membership program called Walmart+.
Beginning in September, customers participating in the retailer’s program will receive free access to an ad-supported Paramount+ offering. This includes films and series with strong brands: Star Trek, Paw Patrol, The Godfather, SpongeBob SquarePants.
Walmart introduced Walmart+ nearly two years ago to increase sales and deepen customer loyalty. Priced at $98 per year or $12.95 per month, the program is the company’s answer to Amazon Prime. That includes free shipping on online purchases, free grocery delivery on orders of $35 or more, and discounts on prescriptions and gas.
Now it also includes access to some essential content from Paramount+, which normally costs $4.99 per month. month and includes advertising. Paramount also offers a premium ad-free product for $9.99 per month.
Walmart+ is growing strongly
Since the start in September 2020, the number of members has grown significantly every month, says the management around CEO Doug McMillon. However, there are no official figures for this. Market research firm Consumer Intelligence Research Partners estimated that Walmart+ had 11 million customers in July. A study by Morgan Stanley shows 16 million subscribers by May 2022.
Paramount Global announced earlier this month that Paramount+ has 43.3 million subscribers worldwide. The company aims to reach 100 million subscribers by 2024.
The deal with Walmart gives Paramount+ a new distribution channel to attract new subscribers and a brand identity. Paramount+ is the only streaming service that has such a deal with Walmart.
Walmart is an interesting investment
The retail giant remains a giant, stable ATM. The pandemic left sales and profit figures largely untouched. Corona shows that many customers are looking for low prices, especially in difficult times.
I don’t expect big jumps from Walmart, but steady growth. The dividend, which has been constant and steady since the 1970s, is particularly interesting. If you buy in at the current rate, you get a dividend of 1.7%. It’s not the top league, but it’s solid.
The dividend trend is clearly upward. Not least the solid balance is ensured. Walmart does not stand out among its peer group with particular equity strength. However, I consider the net debt to be harmless.
In the capital market, Walmart is considered a perfect debtor. Management could borrow billions of dollars in one fell swoop to make an interesting acquisition. But that’s not all: Even the operational business generates such high cash flow year after year that Walmart is not dependent on it at all.
The slight downturn in the stock market did the share good
As an investor, I am happy that Walmart’s stock price has fallen. Since the beginning of the year, it has fallen by 18.6 per cent. The valuation is finally approaching a reasonable level again. The price-to-book ratio is currently 4.8, and the price-to-earnings ratio is 26.6. It doesn’t look cheap yet.
But quality also has its price. In recent years, Walmart has built an infrastructure that will allow online sales to grow tremendously over the years. In terms of free cash flow potential, Walmart stock is still slightly undervalued.
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Henning Lindhoff owns none of the shares mentioned. The Motley Fool owns shares of and recommends Walmart.