About the company
Walmart Inc. (NYSE:), a leading global retailer, operates through three segments: Walmart US, Walmart International, and Sam’s Club. The company has evolved into a leading player in the retail industry, known for its low prices and broad range of products and services. With a strong consumer-centric culture and core values, Walmart serves more than 275 million customers each week through its extensive network of stores and e-commerce platforms in 24 countries. As part of the “Big Three” along with Amazon (NASDAQ:) and Costco (NASDAQ:), Walmart is committed to integrating digital and physical shopping experiences, maintaining a competitive edge against other retail giants. Strategic acquisitions and infrastructure investments reflect the company’s dedication to growth, innovation, and higher-margin businesses such as advertising.
Market Performance and Analyst Ratings
Walmart stock has shown resilience amid a volatile economic landscape, with analyst sentiment remaining positive. Recent analysts from Evercore ISI and Stifel have affirmed “Outperform” and “Hold” ratings, respectively, with Evercore ISI setting a price target of $72.00 and Stifel setting a price target of $69.00. These revisions reflect Walmart’s strong market performance, with the stock price ranging from a 52-week low of $50 to a high of $68, and a current price of $65.88. JPMorgan has upgraded Walmart to “Overweight” with a price target of $81.00, highlighting the company’s balance of defensive and offensive strategies. KeyBanc maintains an “Overweight” rating with a price target of $75.00, underscoring Walmart’s resilience and market share gains. Both Gordon Haskett and D.A. Davidson assigned a “Buy” rating with a $75.00 price target, citing Walmart’s strategic initiatives and potential for continued growth.
Sales and profit prospects
Walmart beat expectations with first-quarter net sales of $161.5 billion, beating consensus estimates. Adjusted earnings per share for the quarter came in at $0.60, beating estimates of $0.52. The company’s updated guidance for fiscal 2024 calls for net sales growth of 3.0%-4.0%, operating income growth of 4.0%-6.0%, and adjusted earnings per share of $2.23-$2.37. Looking ahead to fiscal 2025, Walmart is forecasting net sales of $677.45 billion and earnings per share of $2.42, with revenue of $702.22 billion and earnings per share expected in fiscal 2026. Analysts are forecasting strong growth in global e-commerce and advertising sales, with Walmart’s U.S. sales and earnings per share estimates raised, reflecting confidence in the retailer’s upward trajectory and potential for digital profitability by the end of 2024.
Strategic Initiatives and Consumer Trends
Walmart’s strategic initiatives are paying off, with investments in automation expected to drive down costs and boost market share gains. The company is years ahead of its competitors in creating an ecosystem that includes improved stores, a top-tier digital presence and a fast-growing advertising business. Walmart’s model is shifting toward higher profitability with less volatility. The company’s focus on energy drinks, pet food and beauty products, along with new private labels like bettergoods, is attracting higher-income consumers and driving brand loyalty. The $2.3 billion acquisition of VIZIO is in line with Walmart’s plan to expand into higher-margin businesses, justifying a higher valuation multiple.
Competition and market share
Walmart continues to expand its market share, particularly in the grocery segment, by attracting high-income consumers through its delivery and pickup services. The company’s advertising revenue is expected to grow significantly, indicating a strong revenue stream outside of traditional retail sales. Despite the intense competition, Walmart’s size, diverse offerings, and strategic investments enhance its competitive edge. Roth MKM notes that Walmart’s co-location with Target could impact Target’s performance as value-seeking consumer behavior intensifies.
External factors and risks
The retail sector faces macroeconomic pressures, and Walmart must navigate challenges such as inflationary pressures, industry consolidation, and reduced discretionary spending. However, the company’s strong holiday sales and easing concerns about deflation point to a strong consumer outlook. Fuel/forex assumptions are now seen as modest tailwinds compared to previous models. Walmart’s defensive stance is favored by reduced discretionary spending and uncertainty in the second half of 2024, including the presidential election cycle and holiday calendar challenges.
bear condition
Is Walmart’s profitability at risk due to macroeconomic pressures?
Despite challenges to Walmart’s U.S. EBIT, the potential risks associated with a general merchandise downturn have diminished. The company’s strategic initiatives and investments in higher-margin businesses, such as advertising and memberships, could mitigate these concerns. However, potential cost headwinds, a tight labor market, and competition from Amazon could impact operations. Global margin pressures from the mix of consumables or competitive markets also pose risks.
Can Walmart maintain its competitive advantage in a challenging environment?
Walmart’s significant investments across channels and market share gains underscore its competitive strength. The company’s strategy, including expanding private-label offerings and penetration, supports its market position. However, shrinking general merchandise and the need to maintain strong price gaps in the face of increasing declines present potential risks. Traffic trends may not reach pre-pandemic levels until after 2024, which could impact the company’s performance.
bull condition
Will Walmart’s omnichannel strategy drive future growth?
Walmart’s investments in multichannel infrastructure and expected growth in advertising revenue point to a bright future. The company’s strategy to attract high-income consumers through delivery and pickup services, coupled with its acquisition of Vizio, is expected to boost its financial performance in the coming years. Strong, better-than-expected U.S. corporate sales and higher-margin business segments are driving growth, potentially justifying a higher valuation multiple.
How will Walmart’s market share gains affect its stock performance?
Analysts have highlighted Walmart’s strong unit volume growth and market share gains as indicators of competitive strength that could positively impact stock performance. The company’s diversified growth across segments, including grocery and general merchandise, underscores its adaptability and potential for further expansion.
SWOT analysis
strength point:
- Strong e-commerce growth and omnichannel capabilities.
- Significant market share gains in grocery and general merchandise.
- Diversify revenue streams, including increased advertising revenue.
Weaknesses:
- Challenges to profitability growth due to macroeconomic pressures.
- The impact of high food inflation on discretionary spending.
- Risk of further discounts affecting margins.
Opportunities:
- Develop higher margin initiatives and delivery centers.
- Attract high-income consumers with advanced delivery and pickup services.
- Improvements in e-commerce and advertising profitability.
Threats:
- Macroeconomic headwinds, including potential deflation.
- Fierce competition from other retail giants and e-commerce platforms.
- Consumers are shifting towards targeted deals rather than impulse purchases.
Analysts’ goals
- Evercore ISI: Outperform; Raised to $72.00 from $70.00 (effective June 10, 2024)
- RBC Capital Markets: Outperform; Price raised to $70.00 from $62.00 (as of May 17, 2024)
- BMO Capital Markets: Outperform; Price raised to $75.00 from $65.00 (effective May 17, 2024)
- Barclays Capital Inc.: Overweight; Set at $66.00 (as of May 20, 2024)
- Deutsche Bank Securities: Recommendation raised to Strong Buy; Price raised to $188.00 from $184.00 (as of Nov 6, 2023)
- DA Davidson & Co.: Buy; Price raised to $75.00 from $69.00 (as of June 10, 2024)
- Stifel: Hold; Set at $69.00 (as of June 10, 2024)
- Gordon Haskett: Buy; Set at $75.00 (as of June 10, 2024)
- JPMorgan: Overweight; raised to $81.00 from $66.00 (effective June 10, 2024)
- KeyBanc Capital Markets Inc.: Overweight; Raised to $75.00 from $65.88 (as of June 10, 2024)
The analysis extends from November to June 2024.
InvestingPro Insights
Walmart Inc. (NYSE:WMT) has been a consistent performer, and recent data from InvestingPro supports that narrative. With a market cap of $556.93 billion, Walmart stands as a giant in the retail sector. A price-to-earnings (P/E) ratio of 29.61 suggests the stock is trading at a valuation that takes into account near-term earnings growth potential, as InvestingPro’s tip that Walmart is trading at a relatively low P/E for that growth.
Investors looking for a steady stream of income may find comfort in Walmart’s dividend record. The company has not only maintained its dividend, but has also raised it for 52 consecutive years, with an attractive dividend yield of 1.2%. This commitment to returning value to shareholders is a testament to Walmart’s financial stability and management’s confidence in the company’s future profitability, which is further supported by InvestingPro’s advice that the company has had a strong return over the past three months, with a total price return of 15.53%.
Walmart’s strong fundamentals are reflected in its revenue growth, with the past twelve months through Q1 2023 showing an increase of 5.68%, indicating the company’s ability to efficiently grow its revenue. Additionally, with a solid gross profit margin of 24.5%, Walmart demonstrates its ability to manage its cost of goods and maintain profitability.
For more detailed analysis and additional InvestingPro tips on Walmart, covering aspects such as the company’s debt levels, book value, and analyst profitability forecasts, investors can access the comprehensive list of 12 tips available on the InvestingPro platform.
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