Analysts’ ratings and target price
Most of the analysts covering Walmart (WMT) recommended a “buy” on the stock. Walmart’s continued improvement in comps, driven by higher traffic and the ticket size, is expected to support the stock. Analysts expect Walmart’s margins to improve gradually due to cost-saving measures. Higher margins from the company’s e-commerce sales are expected to support its profitability.
Among the 32 analysts covering the stock, 16 recommended a “buy,” 15 recommended a “hold,” and one recommended a “sell.” Analysts have a consensus target price of $108.47 on Walmart stock, which implies an upside of 8.1% based on its closing price of $100.30 on May 8.
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Walmart shares are trading at a forward PE ratio of 21.1x, which is ~20% higher than its four-year average historical multiple of 17.5x. Walmart stock is trading at a significant premium compared to Target’s forward PE ratio of 12.9x.
While Walmart’s margins are expected to improve gradually, near-term cost headwinds and an unfavorable mix will likely to hurt and limit the upside. Walmart’s current valuation doesn’t look attractive given the low earnings growth rate.