Alibaba’s sharp decline BABA and Walmart’s WMT The stock may be on the radar of investors after both companies reported quarterly results on Thursday.
Alibaba and Walmart stock ended today’s trading down 8% and 9%, respectively, but we take a look at their quarterly reports and current valuations to see if the decline represents a buying opportunity. let’s see.
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Alibaba Q2 Review
Alibaba’s stock decline today was largely due to news that the e-commerce giant will not spin off its Cloud Intelligence Group for a standalone IPO, as many investors had expected. There are cases where it has gone too far.
Still, Alibaba delivered EPS of $2.14 per share, beating the Zacks Consensus by 1% for its fiscal second quarter, even as revenue of $30.81 billion slightly missed estimates of $31 billion. The profit exceeded the forecast. On a year-over-year basis, second-quarter revenue was up 17%, and sales were up 6% from the comparable quarter. Notably, after today’s EPS surprise, Alibaba has exceeded earnings estimates for eight consecutive quarters.
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Walmart Q3 Review
Follow target TGT Investors were disappointed with Walmart’s third-quarter results, which were released on Wednesday and far exceeded expectations. Walmart was able to meet third-quarter earnings estimates of $1.53 per share, which was less surprising than Target’s $2.10 per share earnings and 42% EPS.
But in contrast to omnichannel rival Target, Walmart was able to beat top expectations. Walmart’s third-quarter sales were $160.8 billion, slightly above expectations of $159.48 billion. Compared to the same period a year ago, Walmart’s third-quarter profit increased 3% and sales rose 5%, but the overwhelming outlook for fourth-quarter sales growth of 5% to 5.5% puts WMT stock down. spurred on.
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Current valuation
Alibaba stock has lost some of the hype and excitement of the past few years, but Thursday’s decline makes a strong case for being undervalued. Alibaba stock currently trades at a forward price/earnings ratio of 9.8 times, a significant discount to the Zacks Internet Commerce Market’s 32.8 times and the S&P 500’s 19.7 times. What’s even more interesting is that Alibaba stock is trading well below its all-time high of 66.6x and at a 73% discount to its median price of 36.2x.
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As for Walmart, its stock trades at 26.3 times forward earnings, which is close to the Zacks Retail Supermarket’s 23.8 times, which isn’t an excessive premium to the benchmark. Walmart’s stock price is also below the company’s 10-year high of 28.1 times, but above the median price of 20.2 times.
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Alibaba and Walmart’s stock prices have experienced their biggest declines in a year, and with the busy holiday season approaching, it’s certainly an attractive buy at a reasonable valuation. Upside prices for Alibaba and Walmart stocks could largely depend on the development of earnings estimate revisions in the coming weeks, which is why both stocks currently have a Zacks Rank #3 (Hold).
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