Walmart’s Stock Struggles Despite Positive Analyst Outlook
Walmart Inc.’s stock continued its downward trend on Friday, following a significant selloff in the previous session. Despite positive comments from analysts, including J.P. Morgan, investors remained cautious, and the stock dropped 1.5%.
- Analysts See Opportunity Amid Stock Decline
J.P. Morgan’s Christopher Horvers reiterated an overweight rating on Walmart’s stock, setting a target price of $122 per share. He emphasized that the stock represents a “near-term buying opportunity” at its current price levels. - Strong Consumer Outlook Misinterpreted
Horvers noted that Walmart’s outlook actually signaled a stronger consumer environment, contrary to the negative reaction the stock received. He believed that the market’s response was “worse than reality”.
Management’s Confidence in Long-Term Profitability
Walmart’s management expressed greater confidence in its profit projections, but the company acknowledged that its near-term margin expansion might be slower than initially anticipated.
- Slower Margin Expansion Expected
While there may be a slower pace of margin expansion in the short term, Walmart is still projected to achieve 6% U.S. segment operating margin and 6% internationally over the next three years. Horvers remains optimistic about the company’s ability to adapt and invest in its future growth. - Management’s Strategic Position
According to Horvers, Walmart’s management is making these decisions from a position of strength, indicating that they have control over their profitability.
Stock Performance and Earnings Outlook
On Thursday, Walmart’s stock saw a sharp drop of 6.5%, closing at $97.21 per share, making it the worst performer in the Dow Jones Industrial Average. The decline followed Walmart’s warning that its quarterly earnings would drop for the first time in three years.
- Impact of Smart-TV Acquisition and Calendar Year Changes
Walmart’s lowered profit outlook stemmed largely from expenses related to the integration of Vizio, a smart-TV brand acquired the previous year, as well as a change in the calendar year, with February having one fewer day than last year. - Conservative Approach to 2024
Horvers noted that Walmart is taking a typically conservative approach as it starts the year, adjusting its expectations and strategy accordingly.
Despite the recent stock drop, analysts believe Walmart’s strategic investments will position the company for long-term growth, even if short-term gains are slower than expected.