Walmart share price outpaces market average, analysts bullish going into 2020

Walmart was a Dow Jones Industrial Average (DJIA) leader this year with shares rising more than 27% in 2019 despite market volatility around trade concerns. Walmart shares (NYSE: WMT) opened 2019 at $93.34 and closed the year at $118.84 a share for an annual gain of 27.6%, better than the 20% DJIA gain.

Analysts remain bullish on Walmart going into 2020. Morgan Stanley analyst Simeon Gutman said Walmart’s performance in 2019 was, “solid” with plenty of upside in 2020. He raised the one-year price target from $125 to $130 and said while retail remains challenging for department stores, Walmart has proven legacy retailers have more running room.

“Walmart’s scale and relative defensiveness look even more compelling in light of increasing competition across categories,” Gutman noted.

Ben Bienvenue of Stephen’s Inc. raised the target price of Walmart shares to $135 from $125 in mid-November. Bienvenue increased his fiscal 2020 earnings per share estimates to $5.03, up from $4.94.

“We continue to be impressed by management’s ability to execute on its strategy …, while still investing in the business to drive market-share growth,” Bienvenue recently noted. (Stephen’s Inc. conducts investment banking services for Walmart Inc. and is compensated accordingly for those services.)

Early holiday sales estimates indicate a 3.4% increase according to MasterCard. Walmart and competitors Target and Costco are believed to be some of the biggest winners.

Jerry Storch, founder of Storch Advisors, said consumers are healthy and they no longer go to busy shopping malls and fight the crowds because they order most everything from the comfort of their homes. Storch said department stores are following old models and are no longer part of many consumer’s shopping favorites. He said retailers like Macy’s and J.C. Penney are struggling behind century-old business models.

“It’s a little like people who were making stagecoaches when cars came around. You can make beautiful stagecoaches but if that’s not what people are buying then it’s not going to work,” Storch said in an interview on Yahoo! Finance.

While department stores saw an overall sales decline of 1.8% during the holiday shopping season, e-commerce sales rose 18.8% compared to a year ago, according to Mastercard SpendingPulse. This followed an 18.4% jump in 2018. Holiday sales can account for up to 40% of annual sales and with six fewer days in 2019 between Thanksgiving and Christmas retailers had to sell 20% more each day throughout the season to equal last year’s sales.

E-commerce sales this year made up 14.6% of total retail, according to Mastercard’s data tracking retail sales from Nov. 1 through Christmas Eve. The apparel category registered stronger-than-expected e-commerce growth, Mastercard data showed, with online sales rising 17%.

“E-commerce sales hit a record high this year with more people doing their holiday shopping online,” said Steve Sadove, senior adviser for Mastercard.

Walmart CEO Doug McMillon, who will become chairman of the Business Roundtable on Jan. 1, has said shareholder value should not be the primary goal of the corporation. He advocates taking into account all stakeholders which include employees. That said, analysts note that Walmart remains committed to a quality stock dividend which requires adequate attention to consistently growing net income.