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Where Walmart Stock Could Be Headed following Its Q1 EPS Beat

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Walmart stock gains on first-quarter EPS beat

Walmart (WMT) stock was up more than 2% in the premarket session on May 16 thanks to the retailer’s impressive performance on the earnings front. Weak margins and pressure on earnings limited the upside in Walmart stock.

However, better e-commerce margins and a favorable merchandise mix owing to the strong sales of private-label products is expected to support its profitability in the coming quarters. Lower pressure from transportation costs has also been encouraging.

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Walmart’s continued strength in its US business, stellar e-commerce sales, ability to match Amazon’s offerings (AMZN), and better margins from e-commerce sales are expected to continue to support its stock. However, Walmart faces tough year-over-year comparisons in the coming quarter, which could restrict its growth rate and, in turn, affect its stock price. Price investments, the discontinuation of tobacco sales in some Sam’s Club locations, and currency volatility are also expected to continue to affect its sales and earnings growth rates.

Wall Street’s recommendations

The majority of Wall Street analysts have given WMT “buy” recommendations. Among the 32 analysts covering the stock, 16 have given it “buys,” 15 have given it “holds,” and one has given it a “sell.” Analysts’ target price of $108.47 per share indicates a potential upside of 8.6% from its closing price of $99.88 on May 15.

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