We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Walmart Trading Above 200 & 50-Day SMA: How to Play WMT Stock?
Read MoreHide Full Article
Walmart Inc. (WMT - Free Report) continues to demonstrate impressive upward momentum, consistently trading above its 200-day and 50-day simple moving averages (SMA), which are key indicators of price stability and long-term bullish trends. As of Tuesday, WMT was trading at $80.67, which surpassed both its 200-day SMA of $62.98 and 50-day SMA of $73.63, highlighting a continued uptrend.
Image Source: Zacks Investment Research
SMA is a key tool in technical analysis used to assess price trends by smoothing out short-term fluctuations, offering a clearer view of the stock's longer-term direction. This technical strength, along with the stock's sustained momentum, reflects positive market sentiment and investor confidence in Walmart’s financial health and growth prospects.
Shares of Walmart have seen a 19.7% jump in the past three months compared with the industry’s growth of 18.7%. The company’s strong omnichannel operations have also helped it outpace the broader Retail-Wholesale sector's 8.1% increase and the S&P 500 Index's 4% rise over the said period.
Image Source: Zacks Investment Research
What’s Behind Walmart’s Growth Story?
Walmart’s dominance in the food and consumables space is a significant driver of consistent revenues, particularly in its U.S. operations. As a top player in grocery retail, the company benefits from frequent, repeat purchases, which provide a reliable revenue stream. This stability is especially valuable during economic downturns when consumers focus on essentials. Its "Everyday Low Price" strategy attracts cost-conscious shoppers, even in uncertain economic conditions.
Similar to other retail players such as Costco (COST - Free Report) and Target (TGT - Free Report) , Walmart’s ability to blend its physical stores with its growing e-commerce platform is a key growth driver. The company’s omnichannel strategy allows customers to shop seamlessly online and offline, providing convenient options like curbside pickup, same-day delivery and in-store fulfillment of online orders. Walmart’s investment in digital transformation, such as enhancing its website and mobile app and expanding its e-commerce infrastructure, has led to robust growth in online sales both domestically and internationally. WMT has embraced automation and AI across its supply chain and customer service operations, boosting efficiency and improving the customer experience.
Walmart is rapidly improving its delivery capabilities, with customers increasingly opting for faster delivery options. With its Walmart+ membership program and services like Express Delivery, the company has been improving customer satisfaction and driving higher e-commerce engagement. In the second quarter of fiscal 2025, Walmart’s global e-commerce sales surged 21%, with increased penetration across all markets.
Walmart’s international business continues to play a crucial role in driving growth. Markets such as Mexico (Walmex), India (Flipkart and PhonePe) and China (Sam’s Club) are performing well, benefiting from increased e-commerce penetration and a growing middle class. Walmart’s ability to localize its business strategies for each market while maintaining its global operational scale is a key factor in its international success.
Walmart's diversification beyond traditional retail has also been instrumental in its growth. The company has ventured into new revenue streams like advertising, where it uses its vast customer data to offer brands targeted marketing solutions. Walmart’s health and wellness business is another bright spot, with strong sales of GLP-1 drugs contributing to its comp sales growth. This adds diversity to Walmart’s revenue streams and positions it well in the growing health sector.
Walmart’s solid financial foundation has been instrumental in delivering reliable returns to shareholders. The omnichannel giant boasts an impressive track record, having increased its dividends for 50 consecutive years. This unwavering commitment to dividend growth highlights the company’s financial resilience and strong cash flow generation. In the six months that ended on Jul 31, 2024, WMT generated an operating cash flow of $16.4 billion and a free cash flow of $5.9 billion.
During the same time frame, Walmart paid dividends worth $3.4 billion and repurchased $2.1 billion worth of shares. As of the second-quarter earnings release, the company had $14.5 billion remaining in its share repurchase program. Walmart’s current dividend payout ratio stands at 35%, with a dividend yield of 1%. With an annual free cash flow return on investment of 7.5%, WMT is well-positioned to maintain its dividend payments.
What to Expect From Walmart in FY25?
Walmart raised its guidance for fiscal 2025 during its latest earnings call. The company now anticipates consolidated net sales growth of 3.75-4.75% (at constant currency), up from its previous estimate of 3-4%. The consolidated operating income is projected to grow by 6.5-8%, up from the earlier forecast of 4-6%. Adjusted earnings per share (EPS) for fiscal 2025 are now expected in the range of $2.35-$2.43, an increase from the previous guidance of $2.23-$2.37.
Reflecting optimism around Walmart, analysts have revised their EPS estimates upward. Over the past 60 days, EPS estimates for the current fiscal year have increased by 0.4% to $2.44 and for the next fiscal year by 1.1% to $2.70. These estimates suggest year-over-year growth rates of 9.9% and 10.8%, respectively.
Image Source: Zacks Investment Research
Walmart Has Its Set of Challenges
While Walmart is well-known for its everyday low pricing strategy, consistently lowering prices could erode profitability, especially if costs rise in the future. The company has been investing heavily in supply-chain automation, e-commerce and other technologies. While these investments are crucial for long-term growth, they represent significant capital expenditures and operational costs, which might affect short-term profitability.
Walmart faces intense competition from e-commerce giants like Amazon (AMZN - Free Report) , particularly in the marketplace segment. While Walmart’s marketplace and fulfillment services grew by more than 30% in each of the last four quarters, the company must continue investing heavily to keep pace with rivals, which may weigh on profitability.
Consumer concerns about economic stability, fueled by inflationary pressures, remain a challenge for Walmart. These factors weigh on consumer confidence and discretionary spending, particularly impacting non-essential categories within Walmart’s product portfolio. The company is witnessing a slow recovery in its general merchandise category.
WMT Stock Looks Expensive From Valuation Perspective
While boasting a strong market position, Walmart’s current elevated valuation poses a potential risk. The stock is trading at a forward 12-month P/E ratio of 30.93, which exceeds the industry average of 28.23 and is also very close to its five-year high of 31. This suggests that investors may be paying a high price relative to the company's expected earnings growth. Such high valuation levels increase the risk of a potential correction if the company's performance falls short of investor expectations. WMT’s Value Score of C adds to these concerns.
Image Source: Zacks Investment Research
Investors’ Playbook for Walmart Stock
Walmart’s robust omnichannel strategy, diversified operations and strong financial foundation reinforce its leading position in the retail sector, driving sustained momentum. However, challenges such as the slow recovery in general merchandise, fluctuating consumer behavior and significant investment costs persist.
While the company’s strategic initiatives and favorable outlook set the stage for future growth, striking a balance between aggressive expansion and maintaining profitability is essential. Prospective investors may need to carefully evaluate the current valuation, but for existing shareholders, holding on to this Zacks Rank #3 (Hold) stock seems a prudent move, given its long-term potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Walmart Trading Above 200 & 50-Day SMA: How to Play WMT Stock?
Walmart Inc. (WMT - Free Report) continues to demonstrate impressive upward momentum, consistently trading above its 200-day and 50-day simple moving averages (SMA), which are key indicators of price stability and long-term bullish trends. As of Tuesday, WMT was trading at $80.67, which surpassed both its 200-day SMA of $62.98 and 50-day SMA of $73.63, highlighting a continued uptrend.
Image Source: Zacks Investment Research
SMA is a key tool in technical analysis used to assess price trends by smoothing out short-term fluctuations, offering a clearer view of the stock's longer-term direction. This technical strength, along with the stock's sustained momentum, reflects positive market sentiment and investor confidence in Walmart’s financial health and growth prospects.
Shares of Walmart have seen a 19.7% jump in the past three months compared with the industry’s growth of 18.7%. The company’s strong omnichannel operations have also helped it outpace the broader Retail-Wholesale sector's 8.1% increase and the S&P 500 Index's 4% rise over the said period.
Image Source: Zacks Investment Research
What’s Behind Walmart’s Growth Story?
Walmart’s dominance in the food and consumables space is a significant driver of consistent revenues, particularly in its U.S. operations. As a top player in grocery retail, the company benefits from frequent, repeat purchases, which provide a reliable revenue stream. This stability is especially valuable during economic downturns when consumers focus on essentials. Its "Everyday Low Price" strategy attracts cost-conscious shoppers, even in uncertain economic conditions.
Similar to other retail players such as Costco (COST - Free Report) and Target (TGT - Free Report) , Walmart’s ability to blend its physical stores with its growing e-commerce platform is a key growth driver. The company’s omnichannel strategy allows customers to shop seamlessly online and offline, providing convenient options like curbside pickup, same-day delivery and in-store fulfillment of online orders. Walmart’s investment in digital transformation, such as enhancing its website and mobile app and expanding its e-commerce infrastructure, has led to robust growth in online sales both domestically and internationally. WMT has embraced automation and AI across its supply chain and customer service operations, boosting efficiency and improving the customer experience.
Walmart is rapidly improving its delivery capabilities, with customers increasingly opting for faster delivery options. With its Walmart+ membership program and services like Express Delivery, the company has been improving customer satisfaction and driving higher e-commerce engagement. In the second quarter of fiscal 2025, Walmart’s global e-commerce sales surged 21%, with increased penetration across all markets.
Walmart’s international business continues to play a crucial role in driving growth. Markets such as Mexico (Walmex), India (Flipkart and PhonePe) and China (Sam’s Club) are performing well, benefiting from increased e-commerce penetration and a growing middle class. Walmart’s ability to localize its business strategies for each market while maintaining its global operational scale is a key factor in its international success.
Walmart's diversification beyond traditional retail has also been instrumental in its growth. The company has ventured into new revenue streams like advertising, where it uses its vast customer data to offer brands targeted marketing solutions. Walmart’s health and wellness business is another bright spot, with strong sales of GLP-1 drugs contributing to its comp sales growth. This adds diversity to Walmart’s revenue streams and positions it well in the growing health sector.
Healthy Cash Flows Fuel WMT’s Shareholder-Friendly Moves
Walmart’s solid financial foundation has been instrumental in delivering reliable returns to shareholders. The omnichannel giant boasts an impressive track record, having increased its dividends for 50 consecutive years. This unwavering commitment to dividend growth highlights the company’s financial resilience and strong cash flow generation. In the six months that ended on Jul 31, 2024, WMT generated an operating cash flow of $16.4 billion and a free cash flow of $5.9 billion.
During the same time frame, Walmart paid dividends worth $3.4 billion and repurchased $2.1 billion worth of shares. As of the second-quarter earnings release, the company had $14.5 billion remaining in its share repurchase program. Walmart’s current dividend payout ratio stands at 35%, with a dividend yield of 1%. With an annual free cash flow return on investment of 7.5%, WMT is well-positioned to maintain its dividend payments.
What to Expect From Walmart in FY25?
Walmart raised its guidance for fiscal 2025 during its latest earnings call. The company now anticipates consolidated net sales growth of 3.75-4.75% (at constant currency), up from its previous estimate of 3-4%. The consolidated operating income is projected to grow by 6.5-8%, up from the earlier forecast of 4-6%. Adjusted earnings per share (EPS) for fiscal 2025 are now expected in the range of $2.35-$2.43, an increase from the previous guidance of $2.23-$2.37.
Reflecting optimism around Walmart, analysts have revised their EPS estimates upward. Over the past 60 days, EPS estimates for the current fiscal year have increased by 0.4% to $2.44 and for the next fiscal year by 1.1% to $2.70. These estimates suggest year-over-year growth rates of 9.9% and 10.8%, respectively.
Image Source: Zacks Investment Research
Walmart Has Its Set of Challenges
While Walmart is well-known for its everyday low pricing strategy, consistently lowering prices could erode profitability, especially if costs rise in the future. The company has been investing heavily in supply-chain automation, e-commerce and other technologies. While these investments are crucial for long-term growth, they represent significant capital expenditures and operational costs, which might affect short-term profitability.
Walmart faces intense competition from e-commerce giants like Amazon (AMZN - Free Report) , particularly in the marketplace segment. While Walmart’s marketplace and fulfillment services grew by more than 30% in each of the last four quarters, the company must continue investing heavily to keep pace with rivals, which may weigh on profitability.
Consumer concerns about economic stability, fueled by inflationary pressures, remain a challenge for Walmart. These factors weigh on consumer confidence and discretionary spending, particularly impacting non-essential categories within Walmart’s product portfolio. The company is witnessing a slow recovery in its general merchandise category.
WMT Stock Looks Expensive From Valuation Perspective
While boasting a strong market position, Walmart’s current elevated valuation poses a potential risk. The stock is trading at a forward 12-month P/E ratio of 30.93, which exceeds the industry average of 28.23 and is also very close to its five-year high of 31. This suggests that investors may be paying a high price relative to the company's expected earnings growth. Such high valuation levels increase the risk of a potential correction if the company's performance falls short of investor expectations. WMT’s Value Score of C adds to these concerns.
Image Source: Zacks Investment Research
Investors’ Playbook for Walmart Stock
Walmart’s robust omnichannel strategy, diversified operations and strong financial foundation reinforce its leading position in the retail sector, driving sustained momentum. However, challenges such as the slow recovery in general merchandise, fluctuating consumer behavior and significant investment costs persist.
While the company’s strategic initiatives and favorable outlook set the stage for future growth, striking a balance between aggressive expansion and maintaining profitability is essential. Prospective investors may need to carefully evaluate the current valuation, but for existing shareholders, holding on to this Zacks Rank #3 (Hold) stock seems a prudent move, given its long-term potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.