Walmart Posts Standout Quarter, But Raymond James Downgrades On Flipkart Costs

Walmart Inc WMT delivered a solid second quarter earnings and sales beat Thursday, but was still hit with a downgrade by a still-bullish Raymond James.

The Analyst

Raymond James analyst Budd Bugatch downgraded Walmart from a Strong Buy to Outperform and raised the price target from $100 to $107.

The Thesis

Walmart posted its best quarterly performance since the Great Recession 40-percent e-commerce sales growth, but Bugatch still slapped Walmart with a downgrade. (See the analyst's track record here.)

The analyst said he supports the retailer's long-term strategy of continued investment in growth geographies and opportunities in the new world of retail like Flipkart, but said he cannot ignore that the acquisition of the Indian e-commerce company will weigh on consolidated operating earnings.

Once the deal closes, it will slice 4 to 5 cents per share per month from Walmart's adjusted earnings, Bugatch said. Raymond James' adjusted 2019 estimate for Walmart sits at $4.78, but that figure would be $5 sans the Flipkart acquisition, he said.

“The total drag for [2019 and 2020] operating earnings will depend on when the investment closes and the level of incremental investments needed to continue [to] grow the business going forward."