Can Walmart Regain Investor Confidence?



Stock continued decline

Walmart (WMT) stock extended its losses on the second day after the company reported its fiscal 4Q18 results on February 20, 2018. Walmart stock fell 2.8% on February 21, 2018, as multiple analysts lowered their target price on WMT stock due to the slowing e-commerce sales growth rate. Walmart witnessed significant selling pressure, and in the past couple of days, its stock recorded a decline of about 13.0%.

Walmart stock is trading in the red on a YTD (year-to-date) basis as of February 21, 2018, despite starting the year on a strong note. Walmart stock has registered a decline of 7.3% on a YTD basis and underperformed its peers and the benchmark index.

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Meanwhile, Costco (COST) and Kroger (KR) stock remained roughly flat on a YTD basis. On the contrary, Target (TGT) stock rose 11.8%, while the S&P 500 (SPX-INDEX) is up about 1.0%. The Consumer Staples Select Sector SPDR ETF (XLP) also recorded a decline in the past couple of days, as it invests about 8.4% of its holdings in Walmart stock.

Fundamentals remain intact

Despite a slowdown in its e-commerce sales growth rate, Walmart stood by its guidance and expects to generate 40% growth in its e-commerce business in fiscal 2019. The company’s fundamentals remain strong as Walmart’s comps continue to improve across all segments. Its multichannel offerings, expansion of online grocery pickup services, merchandising initiatives, supply-chain reinvention, and a fast delivery mechanism are expected to drive its top line higher. Meanwhile, the lower tax rate is expected to support its growth measures besides boosting shareholder return through share repurchases and higher dividends.


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