Why We Revised Our Price Estimate For Wal-Mart To $93
We recently revised our price estimate for Wal-Mart (NYSE:WMT) upward from $80 to $93, which is still slightly lower than the current market price. Wal-Mart started the year on a strong note, as the company’s 2017 performance thus far has been mostly above its guidance and market expectations. In fact, the retailer’s stock is now trading almost 45% higher than its price at the beginning of the year.
The primary reason for the price estimate revision was the stronger-than-expected fiscal third quarter results. The company’s revenue increased 4% year over year (y-o-y) to $123 billion, driven by growth in the domestic market due to its marketplace offerings. Wal-Mart U.S. delivered a strong top line performance with strong comparable sales growth of 2.7%, driven by a 1.5% increase in customer traffic and a 1.2% increase in average ticket size. The retailer has recognized the growing trend in online shopping and has accordingly made a few strategic acquisitions including Jet.com, Moosejaw, Shoebuy, and Bonobos. In addition, the company has expanded the number of locations for shoppers to pick up online orders, making the process more convenient. Such investments are paying off as the company’s performance continues to improve. Accordingly, we have adjusted our forecasts to reflect the current trends.
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Going forward, Wal-Mart expects comparable sales growth for both Wal-Mart U.S. and Sam’s Club (ex. fuel) to range between 1.5% to 2.0% in the fourth quarter. For the full year fiscal 2018, the company now expects its adjusted EPS to range between $4.38 to $4.46, compared to previous guidance of $4.30 to $4.40. Correspondingly, we have incorporated the changes to our model to better reflect future revenues and margins.
Our price estimate for Wal-Mart’s stock is slightly lower than the current market price. You can modify the interactive charts in this article to gauge the impact changes in individual drivers for Wal-Mart can have on our price estimate for the company.
Please refer to our complete analysis for Wal-Mart
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