No stranger to major acquisitions, Walmart (NYSE:WMT) shook Wall Street earlier this week when it announced that it was buying television manufacturer Vizio (NYSE:VZIO). However, Senator Elizabeth Warren aims to put the deal under a regulatory spotlight. It’s a pressing matter for WMT stock, as the underlying company seeks enhanced relevance in the modern retail environment.
According to Seeking Alpha, Sen. Warren this morning posted on social media platform X that the Vizio buyout represents a “warning bell.” Specifically, Warren cited Amazon (NASDAQ:AMZN) and its “playbook” of buying or killing competitors in commerce, entertainment and advertising. Therefore, “[r]egulators should scrutinize whether this merger will extend Walmart’s dominance and threaten competition.”
On Tuesday, Walmart stated that it’s acquiring Vizio for $11.50 per share in cash. The terms come out to a fully diluted equity value of approximately $2.3 billion. WMT stock was up modestly in the afternoon session, as was VZIO.
Notably, Warren has been a harsh critic of many corporate deals. Indeed, earlier this week, the legislator criticized Capital One (NYSE:COF) for its planned $35 billion acquisition of Discover Financial (NYSE:DFS), stating that the transaction should be blocked.
Also, it’s worth noting that Warren pushed back against Amazon’s planned purchase of iRobot (NASDAQ:IRBT). Last month, the e-commerce giant abandoned the deal after admitting a lack of a path to European regulatory approval.
WMT Stock Faces Shifting Tides in Retail
As a CNN Business report noted earlier this week, Walmart doesn’t want to just be a grocery giant. Instead, it seeks greater integration of media and advertising elements, as Amazon does. To accomplish this directive, the Vizio buyout makes perfect sense for WMT stock. Through the acquisition, Walmart would be able to sell ads through streaming services on TV.
“This accelerates Walmart’s advertising as it moves into streaming TV opportunities,” said Andrew Lipsman, an independent media analyst. Fundamentally, the deal could make Walmart a bigger presence in the so-called TV streaming wars should the retailer acquire a streaming service.
Amid the cord-cutting phenomenon, TV advertisers have been increasing the amount they spend on streaming ads. With the Vizio deal, Walmart would secure a big data goldmine, allowing the retailer to sell targeted ad space.
For WMT stock, the stakes are high because of the broader competitive landscape. While groceries make up more than half of Walmart’s sales, they also carry razor-thin margins. Further, the space has encountered encroachment from Amazon and other competitors. By buying Vizio, Walmart could potentially take the fight to its rivals.
However, to Warren’s point, a major concern centers on the outsized influence of a few massive corporations.
Why It Matters
Overall, the market appears enthusiastic about WMT stock. Currently, it’s on pace to end this week, up almost 4%. Analysts rate shares a consensus strong buy, breaking down as 24 buys and three holds. Finally, the average price target is $194.35, implying about 11% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
