Walmart a ‘Sleeping Giant’ in Health Care, Morgan Stanley Warns

Walmart Inc. is “decisively bulking up in health care” and that’s something worth watching as the company grows out a suite of initiatives that make it a “sleeping giant to watch,” Morgan Stanley analysts warned.

The retailer’s position as the third-largest pharmacy in the U.S., paired with efforts to open health clinics and acquire technology that will help patients manage their medical care, showcase the $362 billion company’s efforts to blur the lines between retail, health care and technology, analysts led by Simeon Gutman wrote in a note to clients.

While there is “scant detail” surrounding Walmart’s overarching strategy in the space, the huge market opportunity seems logical, according to Gutman.

“A multi-pronged approach makes a lot of sense and recent steps are clear indications this is what Walmart is pursuing,” the analysts wrote in the note. The company’s “huge customer base” and the “gigantic market opportunity to reduce inefficiencies” within the industry make a deeper foray into health care sensible, they wrote.

For the company, the opportunity within health care represents a potential “silver bullet” over the longer term, especially as it prepares to launch a membership program dubbed Walmart+ this month.

“Walmart’s step into insurance likely has few major industry implications in the near to medium term, but this may change later,” Gutman wrote. The company’s efforts could pose an incremental risk to direct-to-consumer brokers like Selectquote Inc. and eHealth Inc., though a broader migration “should benefit all players.”

The foray marks another competitor for health-care investors to keep an eye on. However, the Bentonville, Arkansas-based company’s efforts could fizzle like those of Amazon, Berkshire Hathaway, and JPMorgan Chase-backed Haven Healthcare, which has yet to disrupt the industry. When the trio doubled down on plans to shake-up the industry in January 2018, Wall Street warned the efforts were “more bark than bite” at that point.

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