Walmart Shares Soar After Third-Quarter Results, Analysts Signal More Upside Potential News ad

Walmart today

$90.44 +2.05 (+2.32%)

(As of 11/22/2024 ET)

52 week range

$49.85

▼

$90.91

Dividend yield

0.92%

P/E ratio

37.12

Target price

$91.88

Walmart’s New York Stock Exchange: WMT The third quarter report and fourth quarter guidance showed that the tailwinds driving the company’s business remain strong and resilient, leading to outperformance and further improved guidance. The news sent the stock to a new all-time high, providing a strong technical signal that suggests this market will continue its upward trend. This is a strong signal as the stock is already in an uptrend; it shows support at a high price point with rising volume, and the Stochastic and MACD indicators show a healthy market with the ability to move higher. This post-release move has created a gap driven by fundamentals rather than hype, and new highs are likely.

Walmart results point to a fun holiday season for retailers

Walmart had a strong quarter. The company grew revenue 5.5%, beating MarketBeat’s consensus estimate by nearly 200 basis points. The gains were driven by growth across all segments and product categories, with Walmart US shares up 5%, Sams up 7.2% ex-fuel and International up 8%. E-commerce, advertising, volume and membership revenues contributed to the growth and are expected to remain robust going forward. E-commerce grew 27%, advertising revenue grew 28%, and volume grew low single digits across all segments. Sam’s Club membership revenue, an indicator of future sales growth, rose 15%.

Margin news is also good. The company gradually increased gross margins and cut costs to achieve higher profits. The company’s operating income rose nearly 9%, free cash flow rose 45% and adjusted earnings rose 13.7%. Adjusted earnings also topped consensus estimates, beating revenue by 800 basis points, leaving the balance sheet and return on equity in a fortress.

The forecast is optimistic, but may also be cautious as this is the third increase this year. The company raised its revenue, margin and profit forecasts, expecting them all to exceed consensus estimates. Consumer comments include resilience, stability and resilience, suggesting strong consumer momentum for the rest of the year and holiday spending growth above the low single digit consensus, which is good news for retailers.

The critical detail is that this huge company continues to grow and generate free cash flow growth. Free cash flow is important because it helps support sustainable capital return prospects. Walmart pays dividends and repurchases significant shares, reducing shares by 0.35% in fiscal 2025. Walmart is also a compound dividend producer, increasing its dividend distribution every year.

Analyst sentiment adds tailwind to WMT share price

Analyst sentiment trends for 2024 support Walmart stock price momentum. Since the start of 2024, the stock has received multiple price targets with upgrades, new coverage and improvements, raising the consensus sentiment to Strong Buy from Moderate Buy and a 45% price target. These trends are unlikely to end now that fourth-quarter guidance has been released. Analyst sentiment will take the stock to even higher highs. The latest forecast puts Walmart shares at around $100, more than 10% above the critical support target, with the upper end likely to rise over the next two quarters. The risk is that consumer trends will weaken in early 2025, but there is no sign of that in Walmart’s results or economic data.

The likely scenario is that consumer health will remain stable until President-elect Donald Trump’s inauguration and into the spring. After that, economic tailwinds are expected to develop from falling interest rates and an easing tax and regulatory environment, which will benefit Walmart and other retailers. In this scenario, Walmart could maintain its growth, analyst update cycle, and stock price trend until the end of 2025, and possibly longer.

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