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Walmart Share Price on Upswing Before Q2 Earnings: Time to Buy?

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This year has been imposing for Walmart Inc. (WMT - Free Report) , with its shares soaring 30.7% year to date, slightly more than the Retail - Supermarkets industry’s gain of 28.3%. The big-box retailers’ shares did break out beyond their resistance level in mid-May to register a sustained northward movement.

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What’s more, Walmart’s stock price closed at $68.70 on Aug. 12, just above its 50-day moving average (DMA) of $68.43, signifying a further short to medium-term positive uptrend.

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What’s Behind Walmart’s Uptrend?

Walmart’s shares have been scaling upward primarily due to the company’s investments in artificial intelligence (AI), which has the potential to boost its profit margins by streamlining operations. Its automation investments, like an automated cart-checking system and autonomous forklift manufacturer, are expected to increase Walmart’s earnings before interest and taxes (EBIT) in the long run. 

Walmart’s e-commerce and ad business continue to be growth drivers. Walmart tweaked its online selling platform by letting third-party sellers promote their products. Such an incredible move helped Walmart improve online sales in recent times. Walmart successfully penetrated the ever-growing e-commerce market, where Amazon.com, Inc. (AMZN - Free Report) is already a tough contender.

Walmart’s adoption of Best Buy Co., Inc.’s (BBY - Free Report) ship-from-store model has already helped the retail behemoth’s e-commerce business reach $100 billion in annual sales in 2023. At the same time, Walmart’s ad business is thriving as it notched a compounded annual growth rate of 27.2% over the past three years. In reality, Walmart’s ad business increased in the first fiscal quarter of 2024, thanks to the company’s acquisition of a smart TV maker, Vizio, for $2.3 billion. 

Unlike rival retailer Target Corporation (TGT - Free Report) , Walmart’s same-store sales increased in the fiscal first quarter and drove the company’s revenues and share prices higher. Same-store sales jumped as Walmart stores offered more consumer staple items, whereas Target sold discretionary goods like apparel. 

 

Positive Q2 Earnings to Boost WMT Stock Price Further

Walmart’s fruitful promotion of its subscription-based programs and sales holding up at retail outlets in the prior couple of months should certainly help the company post encouraging second fiscal quarter earnings results, slated to be reported on Aug 15, before the stock market opens.

Walmart is estimated to report an earnings per share of 65 cents for the fiscal second quarter, more than 61 cents a year ago, indicating an increase of nearly 6.6%. Furthermore, Walmart has an average four-quarter positive earnings surprise of 8.3%, a revealing sign that the stock has a fair chance to display superb earnings growth in the upcoming earnings announcement, leading to an uptick in the share price.

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Therefore, major brokerage firms have increased the average short-term price target of WMT by 8.5% from the retailer’s last closing price of $67.95. The analysts have set the highest price target at $82.

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Walmart Valuation Expensive, But Indicates Growth

Walmart stock is undeniably pricey at the moment. By looking at the Price/Earnings ratio, Walmart stock currently trades at 28.2X forward earnings. However, the Retail-Supermarkets industry’s forward earnings multiple is 25.7X.

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But this certainly indicates that market participants believe that Walmart’s stock can make more profits sooner or later, leading to an increase in its demand and price as well.

 

Walmart – An Enticing Buy

With Walmart’s share price on a bullish trajectory, it’s prudent for astute investors to place bets on the stock for striking returns. The company has already been able to generate profits proficiently since WMT has a return on equity (ROE) of 21.6%. Any ROE above 20% is typically considered very strong.

The Zacks Consensus Estimate for WMT’s current-year earnings has increased almost 3% over the past 90 days. The company’s expected earnings growth rate for the current year is 9.5%. Thus, rightfully, WMT has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.


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