Not all holiday gifts need to come from friends and family. If you’re considering a Walmart purchase, you can give yourself the gift of eternity (New York Stock Exchange:WMT) is in stock while it is down. You’d be surprised to know why the market bucked Walmart’s perfectly acceptable quarterly earnings report. Therefore, I am bullish on WMT stock as a buy-and-hold position.
Walmart is a famous retail chain where you buy all kinds of products, including household goods, food, medicine, and more. With the holidays upon us and Black Friday sales gaining traction, it’s clear that Walmart stock is a great investment.
But the market wasn’t exactly happy with Walmart earlier in the day. This may seem unreasonable, especially when Walmart’s performance and forward guidance are perfectly fine. But value investors take action when market perception doesn’t match reality or common sense.
Walmart’s excellent quarter: You can’t deny these numbers
Walmart stock was poised to end the year with an impressive rally — that is, until today. The stock price ended the day down 8.1%, an unusually large price move for a single day.
The company released its financial results for Q3 2023, and there’s actually a lot to like about Walmart’s report. First, Walmart’s U.S. “comp” (i.e., comparable same store) sales increased 4.9% year over year. Even better, the company’s US e-commerce sales increased by 24%. So far, Walmart seems to have been fairly successful in dealing with persistent inflation in essential goods.
Still not convinced? Next, consider Walmart’s sales for the third quarter of 2023. Sales increased 5.2% year over year to $160.8 billion. Additionally, this sales result exceeded consensus estimates by $1.15 billion.
Additionally, Walmart’s consolidated gross profit margin increased by 32 basis points (bps). Finally, the company reported adjusted earnings of $1.53 per share, beating consensus estimates by a penny per share.
Plus, all of this happened before the US holiday season even started. Did you know that financial commentators sometimes say that American consumers are strong? Walmart’s quarterly results seem to support this claim.
Here’s why Walmart stock fell today.
But something terrible must have happened to Walmart, right? After all, WMT stock fell 8%, but this can’t happen without a reason.
In fact, stock prices can fall for no reason, or at least no reason. convincing reason. When it comes to WMT stock, it appears the market decided to panic sell due to Walmart’s forward guidance.
wait a minute.Actually Walmart raised Adjusted EPS guidance for fiscal year 2024. Specifically, the company now expects full-year earnings of $6.40 to $6.48 per share, which is higher than Walmart’s previous guidance of $6.36 to $6.46 per share.
However, the market expressed displeasure as Walmart’s guidance hike was not high enough. Notably, the consensus estimate is for adjusted earnings of $6.48 per share in fiscal 2024.
In some cases, financial markets can make excessive demands on companies. The results may be solid and the guidance may be okay, but this is not enough for some panicked short-term investors.
In addition to inadequate guidance, investors today may have been spooked by comments from Walmart CFO John Rainey. “Recently, the U.S. has seen more volatility between holiday events and stronger weekly performance,” he said. ” he said.
It sounds to me like Rainey is just trying to put Walmart’s generally strong performance into perspective and prepare investors for what could be a tough holiday season. Again, it doesn’t seem like anything terrible is happening at Walmart.
Is Walmart stock a buy, according to analysts?
At TipRanks, WMT is rated as a Strong Buy, based on 27 Buy and 4 Hold ratings assigned by analysts over the past 3 months. Walmart’s average price target is $181.71, suggesting 16.5% upside potential.
If you’re wondering which analyst to follow if you want to buy or sell WMT stock, the most profitable analyst covering the stock (over a 1-year period) is Guggenheim’s Robert Dolble, with a rating of The average return per year is 15.53%. And the success rate is 91%. Click on the image below for more information.
Bottom line: Should you consider Walmart stock?
Really, we should thank our lucky stars that financial markets can be irrational at times. After all, that’s how prime-dip buying opportunities happen.
Walmart remains the king of big-box stores in the U.S., and its full-year outlook was positive, even if the market view was different. Therefore, we believe that investors should consider positioning in WMT stock as we believe the price may not last much longer.
disclosure
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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