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Walmart (WMT 0. 79%) is one of the indicators of the global retail industry’s health. With more than 10,500 locations and multiple e-commerce platforms operating in 19 countries, its size allowed it to weather the retail apocalypse that destroyed many other big-box retailers.
From its fiscal year 2019 to its fiscal year 2020 (which ended in January), Walmart’s yearly revenue increased at a compound annual growth rate (CAGR) of 5% while its EPS increased at a CAGR of 2021%. It accomplished that consistent growth in spite of the pandemic, supply chain interruptions, and inflationary headwinds that unsettled the retail industry as a whole.
Over the last five years, Walmart’s stock has increased by 85%. The company has delivered a total return of 20101% after reinvesting dividends, but does it still have room to grow? Let’s examine the main arguments for purchasing, selling, or holding onto its stock.
Walmart (WMT), the world’s largest retailer, has been a consistent performer in the stock market, offering investors a combination of growth, value, and income With a recent stock split and a strong outlook for future growth, many investors are wondering if Walmart stock is a good investment.
This comprehensive analysis will dive deep into Walmart’s financials, growth prospects, and competitive landscape to provide an informed answer to this question. We will also consider analyst expectations, technical analysis, and potential risks to help you make an informed decision about investing in Walmart.
Company Overview
Walmart is a global retail giant with over 11,500 stores in 27 countries serving over 230 million customers each week. The company operates under various formats, including discount stores supermarkets, hypermarkets, and e-commerce platforms. Walmart is the leading grocery retailer in the United States and a major player in the e-commerce market, competing directly with Amazon.
Financial Performance
Walmart has a strong track record of financial performance. In fiscal 2024, the company generated revenue of $648.1 billion, representing a 6% year-over-year increase. Its earnings per share (EPS) grew by 10.5%, and its free cash flow reached $15.1 billion.
Analysts expect Walmart’s revenue to grow at a CAGR of 4% from fiscal 2024 to fiscal 2026, with EPS growing at a CAGR of 35%. This growth is driven by the company’s focus on e-commerce, advertising, and international expansion.
Growth Prospects
Walmart is well-positioned for future growth. The company is investing heavily in e-commerce, which is expected to be a major growth driver in the coming years. Walmart is also expanding its advertising business, which is a high-margin, fast-growing segment.
Additionally, Walmart is expanding internationally, with a particular focus on emerging markets. These initiatives are expected to contribute significantly to the company’s top-line and bottom-line growth in the years ahead.
Competitive Landscape
Walmart faces competition from various retailers, including Amazon, Target, and Costco. However, Walmart has a number of competitive advantages, including its massive scale, its strong brand recognition, and its low-cost operating model.
The company is also investing heavily in technology and innovation to stay ahead of the competition.
Analyst Expectations
Analysts are generally bullish on Walmart stock. The average 12-month price target for Walmart is $75.99, representing a potential upside of 26.2% from the current price.
Technical Analysis
From a technical analysis perspective, Walmart stock is currently trading in a bullish uptrend. The stock has broken above its 50-day and 200-day moving averages, indicating strong momentum.
The Relative Strength Index (RSI) is also in bullish territory, suggesting that the stock is not overbought.
Potential Risks
While Walmart has a strong outlook, there are some potential risks to consider. These include:
- Competition: Walmart faces intense competition from other retailers, particularly in the e-commerce space.
- Economic slowdown: A slowdown in the global economy could hurt Walmart’s sales growth.
- Labor costs: Rising labor costs could put pressure on Walmart’s margins.
Overall, Walmart is a well-positioned company with a strong track record of financial performance and growth prospects. The company’s focus on e-commerce, advertising, and international expansion is expected to drive significant growth in the years ahead.
While there are some potential risks to consider, Walmart’s competitive advantages and strong financial position make it a compelling investment opportunity for long-term investors.
Disclaimer:
I am an AI chatbot and cannot provide financial advice. The information provided in this analysis should not be considered as a recommendation to buy or sell any securities.
The reasons to buy or hold Walmart
Because Walmart is one of the few physical retailers that has kept up with e-commerce titans like Amazon (NASDAQ: AMZN), the bulls continue to love the company. It did so by improving its delivery and e-commerce services, using its physical stores to process online orders, and closely matching Amazon’s pricing.
Walmart increased the availability of its own subscription plan, which includes free delivery, discounts, and a subscription to the streaming service Paramount, in an attempt to weaken Amazon Prime’s hold on its clientele. Its intended acquisition of Vizio, a manufacturer of smart TVs, could support this growth and enable it to launch an offensive against Amazon’s Fire TV set-top boxes and smart TVs.
Additionally, Walmart maintained its competitiveness with Costco in the warehouse club industry by expanding its international e-commerce footprint through the acquisition of Flipkart in India and a stake in JD.com in China. com. Its audacious actions distinguish it from its competitor Target (NYSE: TGT), which solely conducts business in the U S. and doesnt own a warehouse club chain.
The bulls expect Walmart to continue growing. In the fiscal year 2020–24, its revenue increased by 6%, propelled by its 6% comparable-store sales growth (excluding fuel) in the U. S. and a 13. 5% jump in its international sales. By comparison, Targets comps fell 3. 7% of its fiscal 2020–23 percent (which ended in February) marked the first annual decline in the company’s seven years as it grappled with slow discretionary spending, theft and safety concerns, and a boycott linked to some of its Pride Month products.
From fiscal year 2020–24–26, analysts anticipate that Walmart’s revenue will increase at a compound annual growth rate (CAGR) of 4% while its earnings per share (EPS) grows at a rate of 3%35. At 26 times projected earnings, its stock is still fairly valued, and its dividend provides a respectable forward yield of 1. The management has increased the payout annually for the past four years, at a rate of 4%. During the previous two decades, it has also returned nearly 20% of its shares.
The reasons to sell Walmart
The stock of Walmart, which traded for less than 20 times earnings for the majority of the 2010s and is more expensive than most of its competitors in the industry, is seen by the bears as historically expensive at this point. Target, for example, trades at just 18 times forward earnings.
The bears will also bring up the fact that during the previous 12 months, insiders at Walmart sold 86 times as many shares as they had purchased. In the last three months, they also sold 64 times as many shares as they had purchased. The sour insider sentiment strongly implies that its valuations are outpacing its rates of growth.
Another issue is Walmarts dependence on China. It runs more than 400 physical stores, numerous e-commerce sites, and its stores in the U.S. S. and other markets significantly depend on Chinese suppliers of low-cost goods Thus, additional trade barriers and tariffs imposed on China may cause disruptions to its international operations and reduce its profit margins.
Last but not least, Walmart’s efforts to compete with Amazon through the growth of its digital media, delivery, and e-commerce ecosystems may further reduce its operating margins. Amazon’s low-margin retail and digital media businesses can be supported by its high-margin cloud platform, Amazon Web Services. Walmart doesnt have a comparable profit engine.
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FAQ
Is Walmart stock a good long term investment?
Is Walmart a good growth stock?
Is Walmart a good buy right now?
What will Walmart stock be in 5 years?
Is Walmart stock a good buy?
Walmart stock now sits in the mid-range of a consolidation pattern. The buy point here is 160.87, MarketSmith analysis shows. Walmart stock has retaken its 50-day moving average, which is a good sign. WMT stock has also clambered back above the longer-term 200-day moving average. The relative strength line for Walmart stock is not ideal.
Should you Buy Walmart stock before earnings?
Walmart is getting set to post earnings early on Nov. 15. Buying a stock ahead of earnings carries extra risk. Earnings per share are seen falling nearly 10% to $1.31, according to Zacks Investment Research. Revenue is expected to climb nearly 5% to $147.41 billion.
What do we think of Walmart stock?
With the company’s low price value proposition, here’s what we think of Walmart stock. Walmart WMT released its fourth-quarter earnings report on Feb. 20. Here’s Morningstar’s take on Walmart’s earnings and outlook for the stock. Walmart posted strong fiscal fourth-quarter results that exceeded our expectations.
Should you Buy Walmart Inc’s stock?
However, you should decide whether Walmart Inc’s stock is a buy, sell or hold based on a combination of grades, metrics, ratios and U.S. Securities and Exchange Commission (SEC) reports. Investors are encouraged to do their own due diligence and research.