Several retail analysts raised their target price estimates for Walmart shares following stellar second-quarter results and in spite of some cautionary sentiment from the retail giant, who gave no earnings guidance for the balance of the year.
Walmart shares (NYSE: WMT) closed Friday at $131.65, up by $1.08. The stock ran up to a 52-week high earlier in the week at $137.63 but receded in the past few days as the Bentonville-based company withdrew earnings guidance, making it harder for brokers to model future earnings.
Ben Bienvenu, an analyst with Stephens Inc., saw enough positives from Walmart in the recent quarter to reiterate his overweight rating and his $160 price target. He said despite some slowing comp sales to start the third quarter, he’s bullish on the shares.
“We feel the company is well-positioned in the current environment, and feel confident in Walmart’s ability to accelerate its progress in scaling its eCommerce platform by adding new brands, improving mix and growing the marketplace,” Bienvenu said.
Stephens increased the third-quarter adjusted earnings estimate to $1.24 per share, up from $1.11. For this fiscal year, the estimate is $5.46 per share, up from $5.08 previous forecast. Bienvenu said this forecast reflects a moderation in U.S. comp sales, offset by an increase in Sam’s Club comps amid stronger-than-expected fuel margins and club demand upticks. (Stephens conducts investment banking services for Walmart and is compensated accordingly.)
Walmart shares have increased by 10.64% year to date, and analysts with Raymond James & Associates see more upside with a new target price of $145 on its overweight rating.
“Our view on Walmart remains unchanged and the company’s excellent second quarter, across a wide variety of aspects, reaffirms our positive thesis. Strategically, we support the company’s strategy of investing in important growth geographies [China & India] and new growth opportunities/verticals [1-day delivery, WalmartPlus and healthcare clinics.] We are encouraged by the progress on narrowing U.S. e-commerce’s operating losses and believe management can maintain the momentum going forward.
“Yes, WMT is trading at the high end of historic multiple levels. That said, Walmart has the omnichannel capabilities, financial strength and leadership to win in today’s retail environment. Furthermore, we believe Walmart’s business is defensible and now has the growth characteristics to take market share in any retail environment, thereby justifying a higher-than-historic multiple,” noted Bobby Griffin, a retail analyst with Raymond James.
For the third quarter, which will be reported in mid-November, Griffin estimates net income of $1.19 per share with a full-year net income of $5.35 per share, up from $5.07 previously forecast. (Raymond James also conducts research and investment banking services for Walmart and is compensated accordingly.)
Chuck Grom, an independent retail analyst with Gordon Haskett Research Advisors, raised his price target to $1.45 per share following the recent earnings report. Grom said shares approaching an all-time high price of $138 per share and sanguine commentary about softening sales into August and lack of guidance put some investors on hold. He said Walmart’s online grocery model has staying power well into 2021 as COVID-19 lingers into next year and its online marketplace growth and better performance of general merchandise online should help improve margins for the e-commerce business.
“All told we remain constructive on the story with a solid second-quarter reiterating our ‘accumulate’ rating and raising the target price to $145. We are raising our full-year estimates to flow through the beat in the quarter and keeping our forecast for the back half of the year were left intact.”
For the full year, Gordon Haskett’s per-share net income forecast is $5.33 per share, up from $4.99 previously.