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Stock Analyst Update

Wal-Mart Shares Are Still Too Pricey

Investors should only buy the stock on dips.

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Even after Wednesday's drop, Wal-Mart's (WMT) shares are too expensive for all but the most patient investors. Potential shareholders should wait for the stock to dip below $50, which is a more reasonable price to pay for this retailer.

Wal-Mart investors got a rude awakening today when the company's shares fell about 6% in morning trading, to 54 3/8, despite yet another stellar earnings release. With the stock trading at about 40 times fiscal 2001 earnings at Tuesday's close, the reason for the drop is clear: The shares were too expensive for a low-margin retailer such as Wal-Mart, and thus the slightest whiff of trouble sent them lower.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.