Walmart Stock: Is It A Buy As It Eyes New Buy Point? Here’s What WMT Stock Charts, Analysis Show

0
7


Walmart (WMT) is a retail titan, the world’s largest private-sector employer. And for a long time the Dow Jones stock was a huge growth winner for investors. Walmart continues to lock horns with online behemoth Amazon.com (AMZN) with the launch of Walmart+, its version of Amazon Prime. But is Walmart stock a good buy right now? Read on.




X



Walmart has mammoth revenue. It came in at $559 billion in fiscal 2021. However its size is also a weakness, as sales growth was a tepid 6.7%. Achieving substantial growth is difficult for such a large retail company.

Despite being founded in 1969, the discount giant isn’t resting on its laurels. E-commerce sales have been surging with strong performance at Walmart.com, including its online groceries. However, the vast majority of its revenue still comes from its brick-and-mortar stores. Meanwhile, Amazon has a foothold in physical retail through its Whole Foods chain.

Walmart Earnings Miss Views

Walmart stock was dealt a blow when it reported mixed fourth-quarter results on Feb. 18. Walmart earnings came in at $1.39 a share, while analysts had been looking for earnings per share of $1.51.

One bright spot was sales, which climbed to $152.08 billion, better than Wall Street views for $148.3 billion.

Walmart U.S. Q4 same-store sales grew 8.6%, while Walmart U.S. e-commerce sales leapt 69%, which was lower than any of the three preceding quarters. Walmart’s comps had been expected to rise 5.7%, while online sales had been seen rising 66%.

Walmart sees EPS and sales falling in fiscal 2022 due to divestitures. Excluding fuel, Walmart sees sales up in the low single digits with EPS flat to slightly higher.

The Dow Jones retail giant also announced a new $20 billion buyback program and raised its quarterly dividend to $2.20 from $2.16 per share.

Walmart Stock Analysis

Walmart stock gave up ground after the firm missed earnings views, MarketSmith analysis shows. It comes after an attempted breakout from a flat base with a buy point of 151.43.

Walmart collapsed beneath its 50-day moving average following its report, selling off in high volume. The sell-off continued, sending shares crashing below the 200-day moving average. Walmart stock has managed to move back above both benchmarks, which is a positive sign going forward.

However while the stock has stabilized, the 50-day line has sunk below the 200-day moving average. This is a bearish technical move.

The relative strength line for Walmart stock is not encouraging. It entered a period of decline from late-November until early March. It has been showing signs of life in recent weeks, but remains well below where it started 2021. This means it has been underperforming the broader S&P 500.

So far in 2021, the stock has given up more than 3%. This badly lags the S&P 500’s gain of almost 9%.

Longer term, Walmart’s RS line has been moving sideways for several years. That follows a long slide from a 2009 peak, signaling how Walmart stock has lagged the S&P 500 throughout the long bull market. In other words, if you had bought the SPDR S&P 500 ETF (SPY) instead of Walmart in 2009, you’d have a bigger gain.

Walmart Stock Fundamentals

While it is lagging in terms of price performance, fundamentals are also far from ideal. This is reflected in the stock’s IBD Composite Rating of 36 out of a best-possible 99. This puts it in the bottom 36% of stocks tracked.

The Stock Checkup Tool shows EPS growth has averaged out at 13% over the past three quarters. This is far short of the 25% growth sought by the CAN SLIM cognoscenti.

The longer term picture is even worse for Walmart stock. Over the past three years EPS has grown by an average of 6%. It’s average revenue growth rate of 3% over this same time period is also not very impressive.


Check out Leaderboard, IBD’s premium service with annotated charts and timely buy and sell alerts.


Analyst Cautious On Walmart Stock

CFRA analyst Garret Nelson is rating Walmart stock as a hold with a 145 price target.

“Our hold opinion reflects various positives, balanced by concerns surrounding the name, namely that recent same-store growth is unsustainable and that wage pressures and the launch of Walmart+ could produce some short term pain in the form of margin contraction,” he said in a note to clients. “While stimulus will likely provide a boost to consumer spending, we see better opportunities elsewhere across retail.

The analyst did however praise the Dow Jones firm’s record of long-term earnings and dividend growth,” as well as its “dominant market share position.”

Walmart Stock Benefits From E-Commerce Focus

Walmart did a better job handling the post Covid-19 retail landscape than department stores such as Macy’s (M). In fact, Walmart’s U.S. e-commerce growth has been much faster than Amazon’s retail sales growth. It is growing from a much lower base however.

Dow Jones stock Walmart has also been trying to snatch share in rapidly growing economies such as India and China. An example of this is how Walmart outbid Amazon for Flipkart, sealing a $16 billion deal for a controlling stake in the Indian e-commerce firm in 2018. But more-stringent Indian regulations there have been causing headaches for both Walmart and Amazon.

Walmart is reorganizing its footprint in India so it can compete better against Amazon. It is selling its Indian wholesale business to Flipkart. This should let Walmart get around a key obstacle in India, which bars foreign investors from controlling and marketing their own inventory on their e-commerce platforms.

Financial details of the deal have not been disclosed. But the accord will see Walmart India employees join Flipkart, which will also launch a digital marketplace called Flipkart Wholesale in August.

Walmart+ Ready For Amazon Prime Time

The Walmart vs. Amazon battle for retail supremacy is raging along multiple fronts, and is blurring the lines between online and offline. Walmart, Target (TGT), Costco (COST) and a few other retail giants are adopting a hybrid model to take on Amazon, leveraging their brick-and-mortar stores in conjunction with digital shopping.

Walmart stock jumped on Sept. 1 after the retail giant said customers would be able to sign up for its Walmart+ membership program on Sept. 15.

“Walmart’s Walmart+ program will help retain new customers that it has gained as a result of Covid-19, as well as deepen relationships with long-standing customers, and as such is a positive for the company,” Moody’s analyst Charlie O’Shea told IBD.

Walmart+ costs $98 a year, or $12.95 a month, with a 15-day free trial. The program’s benefits can be used, in one way or another, at more than 4,700 stores. The service will offer free delivery on items, at in-store prices, with 2,700 stores capable of offering same-day delivery.

By comparison, Amazon Prime costs $12.99 a month, but offers perks such as Amazon Prime Video. If members want to be charged yearly, the cost is $119.

The debut of Walmart+ marks the chain’s latest effort to become more of an e-commerce company, as the growth of online shopping remolds customers’ habits — a trend that could be accelerated by the pandemic as more people stay home.

Walmart recently teamed up with e-commerce software giant Shopify (SHOP) to help third party sellers on its marketplace, another venue to take on Amazon.

Walmart To Flip Flipkart?

Walmart is seeking to hold a U.S. IPO of Flipkart stock, which could happen as early as 2021. Reuters cites sources who say the Flipkart IPO could value the e-commerce giant at $45 billion to $50 billion, which would more than double Walmart’s investment.

It had been speculated the offering would take place in late 2021 or early 2022, Covid-related acceleration of e-commerce is said to have pulled the process forward. Walmart is exploring selling 25% of its roughly 81% stake, according to Mint.

The world’s second most populous country is key to the Dow Jones stock. Walmart is investing in India as a global manufacturing hub by tripling its exports to approx. $10 billion per year by 2027.

Is Walmart Stock A Buy?

Walmart stock has not been a long-term stock market leader for many years.

In addition, Walmart earnings growth fails to meet the 25% benchmark sought by CAN SLIM connoisseurs. Investors should focus on companies with superior earnings and strong stock performance, such as those on the prestigious IBD 50 list.

Analysts give Walmart high marks for the company’s efforts and execution competing with Amazon, but it remains to be seen whether this will have a significant impact on earnings and sales.

There is a chance investors could see decent returns from the stock, as it is working to capture e-commerce share and as discounters generally remain in favor among consumers. However, its status as a mature business behemoth means shares will likely lag the broader market in the long run. Investors would have been better off over the past decade eschewing Walmart stock in favor of an index ETF like SPY.

Bottom line: Walmart stock is not a good buy right now. It is trading below key technical benchmarks, and has been lagging the S&P 500 of late. In addition, Walmart stock is unlikely to be a huge winner due to its fundamentals, which are not outstanding.

YOU MIGHT ALSO LIKE:

Have These 5 ‘Hybrid’ Retail Giants Cracked The Amazon Code?

Here Are The Best States To Retire In (And Why You May Be Better Off Staying At Home)

IBD’s New Investing Podcast: Exclusive Trading Tips And Market Insights

Get Free IBD Newsletters: Market Prep | Tech Report | How To Invest

See IBD Stock Lists & Get Pass/Fail Ratings For All Your Stocks With IBD Digital



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here