Company Reports

Wide-moat Walmart’s unrivaled scale relative to its brick-and-mortar retail peers provides the firm with the rare ability to formidably adapt to a dynamic retail landscape. Walmart benefits from an expansive physical footprint and entrenched position in the communities it serves, putting the retailer in close proximity to the vast majority of U.S. consumers. The firm’s unique promise of a wide assortment of goods at low prices has allowed Walmart to retain its status as the nation’s preeminent retailer for over 30 years.

Wide-moat Walmart capped off a strong fiscal 2024 with solid fourth-quarter results that exceeded our expectations. The firm’s $1.80 in adjusted EPS for the quarter landed about 8% ahead of our forecast as the company’s low prices continued to attract consumers. However, management issued fiscal 2025 guidance that came in slightly below our expectations on both the top and bottom lines. As such, we do not plan to alter our $147 fair value estimate materially.

Walmart’s unrivaled scale relative to its brick-and-mortar retail peers provides the firm with the rare ability to formidably adapt to a dynamic retail landscape. Walmart benefits from an expansive physical footprint and entrenched position in the communities it serves, putting the retailer in close proximity to the vast majority of U.S. consumers. The firm’s unique promise of a wide assortment of goods at low prices has allowed Walmart to retain its status as the nation’s preeminent retailer for over 30 years.

Wide-moat Walmart delivered third-quarter results that were mostly in line with our expectations as it continued to attract value-conscious consumers to its stores. The stock tumbled, though, as management cited tumultuous spending patterns leading into the holiday season as inflation and tighter economic conditions remain headwinds. We believe Walmart is well positioned to navigate a slower spending environment given its impressive scale and enticing low-price value proposition in high-frequency categories such as grocery. We plan to modestly raise our $145 fair value estimate due to time value of money as shares approach fairly valued territory.

Wide-moat Walmart delivered solid second-quarter results, posting robust growth in comparable sales and operating profit, as the retailer's low-price value proposition continues to resonate with consumers. In response, management raised its fiscal 2024 adjusted earnings per share guidance by a mid-single-digit percentage to a range of $6.36-$6.46. Given Walmart’s dominant position in high-frequency categories such as grocery, we believe the retailer is well positioned to navigate an uncertain economic environment. We maintained our fair value estimate of $145 per share.

Walmart’s unrivaled scale relative to its brick-and-mortar retail peers provides the firm with the rare ability to formidably adapt to a dynamic retail landscape. Walmart benefits from an expansive physical footprint and entrenched position in the communities it serves, putting the retailer in close proximity to the vast majority of U.S. consumers. The firm’s unique promise of a wide assortment of goods at low prices has allowed Walmart to retain its status as the nation’s preeminent retailer for over 30 years.

Against an ultra-competitive backdrop, we lowered our fair value estimate on wide-moat Walmart to $145 per share, from $152 previously, due to a slight pullback in our near-term profitability forecast and more modest assumptions regarding the firm's long-term return on invested capital.

Walmart’s unrivaled scale relative to its brick-and-mortar retail peers provides the firm with the rare ability to formidably adapt to a dynamic retail landscape. Walmart benefits from an expansive physical footprint and entrenched position in the communities it serves, putting the retailer in close proximity to the vast majority of U.S. consumers. The firm’s unique promise of a wide assortment of goods at low prices has allowed Walmart to retain its status as the nation’s preeminent retailer for over 30 years.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we surmise Walmart is the only American firm that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we believe Walmart is the only American firm that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand.

Our $148 per share valuation of wide-moat Walmart should not change significantly after the company announced a solid start to fiscal 2024 (first quarter ended April 30). With the namesake domestic stores, international locations, and Sam's Club all benefiting from consumers' focus on value and redirection of spending toward consumables and everyday essentials, we believe Walmart is well-positioned for the turbulent economic environment. We still expect low-single-digit annual top-line growth rates and mid-single-digit operating margins over the long term. With the shares trading near our valuation, we suggest investors await a greater margin of safety.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we believe Walmart is the only American firm that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand.

We think wide-moat Walmart's fiscal 2023 fourth-quarter results showcased its reputation as a value leader. However, management's weaker fiscal 2024 outlook reflects an uncertain economic backdrop and further margin degradation from unfavorable mix shift (towards grocery and the health & wellness categories, at the expense of general merchandise), albeit at a lesser degree relative to fiscal 2023. In this context, management's guidance of 2.5%-3% sales growth and adjusted EPS of $5.90-$6.05 falls short of our 3.3% and $6.79 respective estimates. We plan to adjust our near-term estimates to be in line with the updated outlook, but our long-term forecast of low-single-digit sales growth and mid-single-digit adjusted operating margins remains intact. As such, our existing $144 fair value estimate should not change materially, leaving shares fairly valued.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we believe Walmart is the only American firm that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand.

We plan to raise our $139 fair value estimate for wide-moat Walmart by a mid-single-digit percentage (like the trading price reaction) after the firm announced strong third-quarter results that benefited from consumers’ heightened focus on its value proposition. We still expect low-single-digit annual top-line growth and mid-single-digit operating margins over the long term. With the shares trading near our valuation, we suggest investors await a greater margin of safety.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we believe Walmart is the only American retailer that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand. While it has lifted sales, we do not expect the COVID-19 pandemic to materially alter Walmart’s long-term standing.

Our $138 fair value estimate should not change significantly after wide-moat Walmart reported second-quarter results, with management indicating that sales and inventory positions improved late in the period (ended July 31). We still expect low-single-digit annual top-line growth and mid-single-digit operating margins over the long term and suggest prospective investors await a greater margin of safety.

We do not believe wide-moat Walmart’s long-term standing has changed despite revised guidance that suggests significantly more near-term profitability pressure than we had expected. Our $138 per share valuation should slide by a high-single-digit percentage in the wake of the news, similar to the after-hours trading reaction, and we suggest prospective investors await a greater margin of safety.

With unrivalled scale, prodigious procurement strength, a strong brand, and a growing e-commerce platform, we believe Walmart is the only American retailer that can compete comprehensively with Amazon’s retail offering. We expect shoppers will require retailers to offer a menu of fulfillment options for sales made through digital and physical channels, advantaging Walmart’s dense store network, deep vendor relationships, and established brand. While it has lifted sales, we do not expect the COVID-19 pandemic to materially alter Walmart’s long-term standing.

Our $152 per share valuation of wide-moat Walmart should slide by nearly 10%, not far from the market’s reaction to first-quarter earnings that saw greater-than-anticipated margin pressure caused by pandemic-related factors and inflation. Still, we believe Walmart’s value proposition should become increasingly valuable to strained consumers and expect low-single-digit annual percentage sales growth and mid-single-digit adjusted operating margins over the next decade. Prospective investors should await a more attractive entry point.