Should you buy Walmart WMT NOW
Here's a summary of Walmart's latest earnings report from November 19, 2024
Earnings Highlights: Q3 Performance Review
Walmart reported its earnings on November 19, 2024, surpassing analysts' expectations across multiple metrics. Here’s a breakdown:
Key Metrics:
Revenue Growth: 5.5% increase year-over-year, reaching $169.6 billion for Q3.
Operating Income: Up 8.2% to $6.7 billion, driven by improved margins and membership growth.
E-Commerce Sales: Grew 27%, with significant gains in store-fulfilled pickup and delivery services.
Advertising Revenue: Increased by 28%, with Walmart Connect in the U.S. up 26%.
Comparable Sales: Walmart U.S. saw a 5.2% rise, including fuel.
Earnings Per Share (EPS): Adjusted EPS came in at $0.58, beating analyst expectations of $0.53.
Guidance for FY 2025:
Net sales growth forecasted at 4.8% to 5.1%.
Adjusted operating income projected to grow by 8.5% to 9.25%.
Stock Performance and Market Reaction
Walmart’s stock responded positively to the report, climbing 3.6% during the trading day and contributing to its impressive year-to-date growth of 66.15%.
While Walmart’s growth mirrors that of a tech stock, its valuation raises questions about whether the current price is justified.
Risk Assessment: Is Walmart Overvalued?
We analyzed Walmart’s valuation and technical indicators to assess the risk of investing at its current price:
1. Relative Strength Index (RSI):
Walmart’s RSI sits at 70, indicating it is in overbought territory. While it could see short-term gains, the likelihood of a pullback is high.
2. Price-to-Earnings (P/E) Ratio:
Walmart’s P/E ratio is 45, significantly higher than the S&P 500 average of 15–25.
Compared to high-growth stocks, Walmart’s P/E is 80% higher, signaling overvaluation relative to its growth trajectory.
3. MACD Indicator:
The MACD is currently on a buy signal, which could lead to additional short-term gains. However, the risk of reversal is increasing.
4. Growth Projections:
Analysts project an average growth rate of 2.77% for Walmart in the next fiscal year, which is well below the market average return of 8%.
Buy, Sell, or Hold?
At its current price, Walmart appears to be a high-risk investment for long-term holders. The combination of overbought technical indicators and a high valuation suggests that potential returns may underperform the broader market.
Our Recommendations:
Existing Investors: Hold and consider selling if the stock price rises further in the short term.
New Investors: Wait for a price retracement or more favorable valuations before entering.
Short-Term Traders: Walmart may offer opportunities during a potential Santa Claus rally.
Final Thoughts
Walmart’s Q3 earnings highlight the success of its omnichannel strategy, particularly its growth in e-commerce and advertising. However, current valuations and technical indicators suggest caution for new investments.
Tomorrow, we’ll analyze earnings from Nvidia and Target, diving into the tech and retail sectors. Stay tuned for our insights and actionable recommendations!
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Happy investing, and stay safe!
Norbert B.M.