Scores of investors tuned into TV manufacturer Vizio’s stock on Tuesday following reports that the company is a potential acquisition target. The shares traded up nearly 24% on the day, contrasting the 1.4% slump of the S&P 500 index. An article published that day by The Wall Street Journal stated that retail giant Walmart is in talks to buy the company for more than $2 billion. Quoting unidentified “people familiar with the matter,” the financial newspaper said the discussions center around acquiring the smart TV maker’s technology platform.
Acquiring Vizio’s tech platform would give Walmart access to its active user base of nearly 18 million people and enable it to expand its ad revenue, which grew at a rate exceeding 27% last year and boasting annual advertising revenues exceeding $6 billion. Walmart is increasingly monetizing its reach and troves of shopper data to sell ads across its website and store assets such as digital displays, connected TVs, and radio. Adding Vizio to the mix could give the big-box retailer more screens to display ads to the 130 million shoppers visiting its 5,000 U.S. stores weekly.
Vizio’s stock surged on the news, rising as much as 32% in late trading. The company’s shares were trading at their highest since November 2022. It is the latest in a series of moves by Walmart to strengthen its advertising business, which was a vital driver of the company’s disappointing fourth-quarter earnings report on Monday. The company missed estimates for profit and sales and warned of slowing growth as it continues to struggle with Amazon’s e-commerce threat.
Despite the intense share price action, there are many reasons to be skeptical that the deal will go through. The most notable is that the reported offer price is far higher than Vizio’s current market capitalization of $1.54 billion at close on Tuesday. That is more than 30% above the company’s current valuation, suggesting that investors are mainly betting on the acquisition’s success.
Another concern is that the move comes when cheaper Chinese imports are decimating the consumer electronics industry. As the cost of television sets continues to decline, many consumers are replacing older models with newer devices with better quality and more features. While Vizio has made some strides in addressing this trend by improving the quality of its products, the impact has been offset to some degree by the rise of more competitive Chinese brands.
Investors should remember that the television industry remains highly fragmented, with various players competing to sell products at different price points. The WSJ’s report suggests that Walmart can leverage its deep customer connections to exploit this opportunity. Still, it will likely face stiff competition from other retailers and technology companies looking to capitalize on the shift to brighter TVs.
