Some analysts say Walmart’s stock fall after a disappointing profit warning is a great time to purchase.
Some analysts say that the drop in Walmart’s stock price after a disappointing profit warning makes it a great time to buy shares of the retail giant.
Walmart cut its profit forecasts for the second quarter and the whole year on Monday because of rising prices and a change in how people spend their money. This sent the company’s stock down more than 8%.
Many analysts agree that the results are bad news for Walmart and other retailers in the future. Michael Lasser of UBS thinks that Walmart shares are undervalued at their current price. He rates Walmart as a buy and has a price target of $152 for the stock.
Mark Astrachan, a stock analyst at Stifel, agrees that the stock’s reaction on Tuesday could be a “clearing event” for Walmart. He said that he thinks the second quarter will be a “trough” for gross margins going forward, but he kept a hold rating on the stock.
Even though Walmart is having trouble right now, BMO Capital Markets’ Kelly Bania (outperform, $160) thinks the company will get better and have “more consistent earnings growth cadence” in the future.
Bania said of the guidance cut, “This announcement was disappointing and shows how little visibility there still is across the consumer landscape. However, we continue to see WMT’s share price as attractive for a global retailer with scale that is hard to copy and best-in-class pricing.”
Stephanie Wissink of Jefferies (buy, $150) called the change a “necessary hard reset” and kept the stock’s buy rating.
“We don’t like it when a company we think will do well in a recession gives us bad news, but we think this change is more realistic than the last one,” Wissink wrote.
Even with the profit warning, many analysts think Walmart is still better off than its competitors in the current economy. Kate McShane of Goldman Sachs (buy, $135) says that many of the current cost pressures are likely only temporary and that the company should continue on its long-term path.
Baird’s Peter Benedict (outperform, $140) said that Walmart’s continued growth in the grocery market shows that consumers are putting their trust in the company in this tough market. He said that the latest move may be an attempt to “clear the decks” and lower the risk of Walmart’s stock as John David Rainey starts his new job as chief financial officer.
In a note to clients, Michael Baker of DA Davidson said, “We still keep our Buy rating because we think estimates have been de-risked and WMT seems to be gaining market share in the current environment, which should be stable.”
“This should lead to better sales, and once the stock is righted in 2023, margins should go back up.”
