Supermarket-retailer Walmart (WMT -0.67%) impressed investors on Thursday morning. The company reported revenue and adjusted earnings per share well beyond the consensus analyst estimates for the two key financial metrics.
Highlighting how Walmart seems to be bucking a challenging macroeconomic environment, first-quarter sales growth actually accelerated, compared to the company's growth rate in the fourth quarter of 2022. Further, double-digit growth in Walmart's adjusted earnings per share showed how the company is leveraging expenses and expanding its operating margin.
With the company's impressive business performance despite high inflation and interest rates pressuring the consumer, some investors might be taking a closer look at the stock to see whether it's a buy or not. Let's take a look.
A strong quarter globally
Walmart's first-quarter revenue rose 7.6% year over year -- an acceleration from the 7.3% growth in the fourth quarter of 2022. Same-store-sales growth rates "were strong globally," said Walmart CEO Doug McMillon in the company's first-quarter earnings release. Notably, one key to Walmart's growth was a 26% year-over-year increase in e-commerce sales.
With sales growing nicely and Walmart's operating margin expanding during the quarter, adjusted earnings-per-share growth outpaced revenue growth, rising more than 13% year over year. As management explained during Walmart's first-quarter earnings call, cost leverage exceeded management's expectations for the period.
It's worth calling out Walmart's rapidly growing advertising business. Sales from its global advertising business increased 30% year over year. As one of the company's higher-margin initiatives, the rapidly growing segment is good for Walmart's operating margin.
With such strong results in the rearview mirror, management lifted its outlook for full-year fiscal 2024 adjusted earnings per share. Previously, it was expecting these earnings to be between $5.90 and $6.05. Now, it anticipates adjusted earnings per share for fiscal 2024 to be between $6.10 and $6.20.
A high price tag
Walmart's goods may be known for their low prices, but you can't say the same about the grocery-chain's stock. Shares have risen 16% over the past year, giving the stock a premium valuation.
Trading at nearly 36 times earnings, Walmart shares don't look overvalued at this level. But they don't look undervalued, either. Even though Walmart's top-line growth during a tough environment shines the spotlight on the stock, growth is hardly fast enough to justify further multiple expansion in the stock's price-to-earnings ratio.
Sure, a durable business that's able to grow at reasonable rates consistently deserves to trade at a premium valuation. But further multiple expansion could mean the stock is getting ahead of itself, especially in light of the company's large debt load that it has used to leverage its returns.
Walmart's total debt is $49.5 billion and its cash and cash equivalents amount to $10.6 billion. Not only does this significant debt increase long-term risk to the retailer's business, but it also will likely cost the company more interest in the future with financing rates significantly higher than in past years.
While Walmart's strong results confirm that shareholders should keep holding, the stock's valuation may be too pricey for investors to buy in at this level.
Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
FAQs
Investors should consider Walmart a great deal that delivers stability with a reasonable shot at faster earnings growth. Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart.
Is Walmart a good stock to buy 2024? ›
Trading plan for 2024
the key support levels: 164.74, 151.25, 134.59, 115.82, 91.79; the key resistance levels: 181.16, 195.81, 212.43; Walmart's stock will most likely continue to evolve in an uptrend in 2024. The buyer will hold the price within the range of a bullish trend.
Is Walmart stock a buy right now? ›
The highest analyst price target is $75.99 ,the lowest forecast is $58.99. The average price target represents 8.32% Increase from the current price of $60.68. Walmart's analyst rating consensus is a Strong Buy. This is based on the ratings of 28 Wall Streets Analysts.
What is the 12 month forecast for Walmart stock? ›
Based on analysts offering 12 month price targets for WMT in the last 3 months. The average price target is $65.97 with a high estimate of $75.9924 and a low estimate of $58.99.
What are experts saying about Walmart stock? ›
Expert reviews on Walmart Inc. stock are mixed, with some expressing concerns about the valuation being too high, while others praise its strong business performance and potential for growth. The company's online presence, retail advantage, and ability to collect massive data using AI are highlighted as key strengths.
Is it smart to buy Walmart stock? ›
From fiscal 2024 to fiscal 2026, analysts expect Walmart's revenue to rise at a CAGR of 4% as its EPS grows at a CAGR of 35%. Its stock still looks reasonably valued at 26 times forward earnings, its dividend offers a decent forward yield of 1.4%, and management has raised the payout annually for 51 consecutive years.
What stock will boom in 2024? ›
2024's 10 Best-Performing Stocks
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6 more rowsApr 1, 2024
Walmart's analyst rating consensus is a Strong Buy. This is based on the ratings of 28 Wall Streets Analysts.
What is the outlook for Walmart in 2024? ›
Due to its heft in grocery, Walmart is expected to report sales of $645 billion for fiscal 2024, more than double its closest competitor.
Should I keep my Walmart stock? ›
From fiscal 2024 to fiscal 2026, analysts expect Walmart's revenue to rise at a CAGR of 4% as its EPS grows at a CAGR of 35%. Its stock still looks reasonably valued at 26 times forward earnings, its dividend offers a decent forward yield of 1.4%, and management has raised the payout annually for 51 consecutive years.
Walmart Stock Forecast
The 29 analysts with 12-month price forecasts for Walmart stock have an average target of 62.77, with a low estimate of 54.33 and a high estimate of 76. The average target predicts an increase of 6.16% from the current stock price of 59.13.
Is Walmart a good long-term investment? ›
This part of its business produced fiscal 2024 revenue of $114.6 billion, up over 13% from 2023. A long history of dividends adds the icing on the cake, providing a source of passive income. These various factors combine to make Walmart a worthy long-term investment.
Who owns the most shares of Walmart? ›
FAQ
- Jim Walton owns the most shares of Walmart (WMT).
- The ownership structure can impact the company's decision making, as large institutional investors may exert influence on the company's management and can also affect the company's stock price with their buying and selling patterns.
Walmart stock price stood at $60.14
| Year | Mid-Year | Year-End |
|---|
| 2024 | $79.47 | $104.39 |
| 2025 | $106.68 | $108.86 |
| 2026 | $111.90 | $118.51 |
| 2027 | $120.24 | $133.77 |
8 more rowsInvesting $1,000 In Walmart IPO: Walmart offered shares for $16.50 on Oct. 1, 1970 for its IPO. A $1,000 investment could have purchased 60.61 shares of Walmart stock.
Where will Walmart stock be in 5 years? ›
Walmart stock price stood at $59.53
According to the latest long-term forecast, Walmart price will hit $100 by the end of 2024 and then $110 by the middle of 2026. Walmart will rise to $125 within the year of 2027, $150 in 2029 and $200 in 2034.
Is Walmart stock undervalued or overvalued? ›
With its 2-star rating, we believe Walmart's stock is overvalued compared with our long-term fair value estimate, which we have raised to $50 per share from $49 following its most recent earnings report and 3-for-1 stock split, primarily due to the time value of money.
How high will Walmart stock go? ›
Stock Price Forecast
The 29 analysts with 12-month price forecasts for Walmart stock have an average target of 62.77, with a low estimate of 54.33 and a high estimate of 76. The average target predicts an increase of 4.37% from the current stock price of 60.14.
