Do You Think Walmart’s Stock Will Trade Lower Post-Q2?

(CTN News) – The world’s largest retailer (by revenue), Walmart (NYSE: WMT), will release its fiscal second-quarter results on Thursday, August 17.

As revenue and earnings miss consensus marginally in fiscal second-quarter results, WMT stock is likely to trade lower. With inflation and recessionary fears weighing on consumers, Walmart expects a challenging year in FY 2024. In FY 2024, Walmart expects net sales to grow by 3.5%, almost in line with the previous year.

A current Walmart debt of $49.5 billion and cash and cash equivalents of $10.6 billion should be noted. Since financing rates are significantly higher than in previous years, this significant debt increases both long-term risk and interest costs for the retailer.

Walmart Connect, the company’s digital advertising division, is one of Walmart’s most game-changing initiatives. Traffic to Walmart.com is primarily driven by online shopping.

The retailer’s ad revenue increased over 30% year-over-year (y-o-y) in Q1, in line with its advertising growth for fiscal 2023.

Although digital ad giants such as Meta Platforms and Alphabet have seen their sales growth slowed by the current challenging economic environment, these gains occurred despite the current challenging economic environment.

As a result of our forecast, Walmart’s market capitalization is estimated to be $153 per share, 5% lower than its current price. Take a look at our interactive dashboard analysis of WMT’s Earnings Preview: What To Expect in Q2? Click here for more information.

In Q2 2024, Trefis estimates revenues at $158.1 billion, slightly below consensus.

In Q1 2024, Walmart reported revenue of $152 billion, up 7.6% y-o-y, driven by 7.4% growth in same-store sales in the U.S. E-commerce revenue increased 27% in the U.S. Store-fulfilled pickup and delivery as well as advertising contributed to this growth. Walmart’s revenue for fiscal 2024 (year ending January 2024) is expected to be $633.7 billion.

( 2) Consensus EPS estimate likely to be marginally missed

The consensus estimate of $1.67 for WMT’s Q2 2024 EPS is slightly below Trefis’ analysis. Its adjusted earnings per share grew more than 13% year-over-year to $1.47 as sales increased and its operating margin expanded during the quarter.

Walmart’s management explained during its first-quarter earnings call that cost leverage exceeded management’s expectations.

(3) Lower estimate of stock price than current market price

Using Walmart’s valuation, an EPS estimate of $6.14 and a P/E multiple of 25.0x in fiscal 2024 translate into a price of $153, which represents a 5% decrease from the current market price.

It is helpful to compare the company’s performance with its peers. According to WMT Peers, stock is compared to its peers based on metrics that are relevant to investors.

In addition to peer comparisons for companies across industries, you will find other valuable resources at Peer Comparisons.

Our expectation is that WMT stock will not yield much return in the near- to mid-term. However, what if you prefer a portfolio that offers high performance and low downside risk? Trefis Reinforced Value portfolio has consistently outperformed the market while limiting losses during periods of sharp market declines.

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