Why Walmart Stock Has a Consensus ‘Hold’ Rating
Balanced risk-reward for WMT
Of the 35 analysts covering Wal-Mart Stores (WMT) stock, 32.0% have rated the stock as a “buy” as of March 15. The stock has been rated as a “hold” by 57% of the analysts, and it has been rated as a “sell” by 11.0% of the analysts. As of March 15, Walmart was trading at $70.58, which is 5.4% below the analysts’ 12-month price target of $74.37 per share.
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Initiatives and headwinds
Walmart has taken numerous initiatives to boost its sales by investing in stores, technology, and people. Moreover, innovative product offerings are likely to drive category growth, which was reflected in the fiscal 4Q17 results. The company is likely to benefit from the strategic investments it has made over the past couple of years.
Meanwhile, its e-commerce business is witnessing strong sales, driven by ramped up e-commerce initiatives, including the expansion of online grocery, store pickup, and its direct-to-home offerings. But adverse currency movements, food deflation, increased competition, increased investment in prices, and continued softness in the UK are all likely to dampen the company’s margins.
Notably, ETF investors looking for exposure to Walmart can consider the Consumer Staples Select Sector SPDR ETF (XLP), which invests 5.5% of its portfolio in the company.
Recent upgrade and peer comparisons
On February 22, Bank of America Merrill Lynch upgraded Walmart’s rating to “buy” from “hold” and increased its price target to $88.00 from $76.00.
Of the 28 analysts who have rated Target (TGT), 21% have recommended a “buy” on the stock, while 64.0% have recommended a “hold,” and 14.0% have rated it as a “sell.”
Of the 31 analysts covering Costco (COST), 68.0% have rated the stock as a “buy,” while 32.0% have rated it as a “hold,” and none has rated it as a “sell.”
For Kroger (KR) stock, 52.0% of the 25 analysts have rated the stock as a “buy,” while 40.0% have rated it as a “hold,” and 8.0% have rated it as a “sell.”
We’ll discuss Walmart’s valuation in the next and final part of this series.