Analyst Note| Zain Akbari, CFA |
Wide-moat Walmart’s fourth-quarter results fell short of our expectations, leading to $5.48 in full-year adjusted diluted EPS versus our $5.59 target, but our long-term view is intact, as we attribute the shortfall to transitory factors. An adjustment for the time value of money should largely offset the impact on our valuation, so we do not expect our $124 fair value estimate to change significantly. We assume a low-single-digit sales growth rate and 4%-5% adjusted operating margins over the next decade. Despite a mid-single-digit percentage decline in the shares on the news (more pronounced than our reaction, likely due to our greater focus on Walmart’s long-term prospects rather than the progression of the pandemic-era sales surge), we suggest investors await a more attractive entry point.