Walmart's Expanded Vision Beyond Retail In Focus: Analyst Forecasts Higher Profits, Solid Customer Relations

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on Walmart Inc. WMT, raising the forecast to $205 from $185.

Feldman highlighted Walmart’s ‘expanded vision beyond retail and e-commerce’ – including advertising, merchant services, and last-mile delivery.

The analyst adds that these components would yield higher profits than conventional retail and are poised to bolster Walmart’s customer relations while securing profitable market share growth.

The company reported fourth-quarter FY24 net sales growth of 5.7% year-over-year to $173.39 billion, beating the consensus of $170.71 billion.

Adjusted EPS was $1.80, beating the consensus of $1.65.

The company’s quarterly performance reflected share gains during the 2023 holiday season driven by its omnichannel model and excellent execution, Feldman notes.

Following the quarterly performance, the analyst projects Walmart to remain a leader and market share gainer in the retail industry, given its defensive product mix, strong focus on the customer, ability to leverage talent and technology, and robust financial flexibility.

As per the analyst, Walmart’s international division saw a strong total sales rise of 17.6%, driven by growth across all major markets, notably double-digit increases in Flipkart and China. 

Moreover, emerging ventures like marketplace, fulfillment services, Walmart+, and advertising (up 33%, including a 22% rise in the U.S.) are gaining momentum.

Meanwhile, Walmart agreed to buy VIZIO Holding Corp. VZIO for $11.50 per share in cash, equating to a fully diluted equity value of approximately $2.3 billion. 

Per the analyst, the acquisition of VIZIO should help accelerate the growth of advertising, although the deal is expected to be dilutive to earnings in 2024.

For 2024, the analyst maintained the earnings per share estimate of $7.13, with total sales growth of 4% to $674 billion (up from $670.5 billion previously).

Feldman projects operating margin expansion of 12 bps to 4.3% in FY24 (down from 4.4% previously).

Price Action: WMT shares are trading lower by 1.41% to $173.37 on the last check Wednesday.

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