On Monday, UBS reaffirmed its positive stance on Walmart (NYSE:WMT) shares, retaining a Buy rating and a $190.00 price target. The assessment anticipates that Walmart will continue to demonstrate resilience and gain market share, despite various economic headwinds facing the retail sector.
"We believe WMT generated good momentum in 4QE despite the topsy-turvy spending backdrop throughout the period. So, we expect the details of its upcoming 4Q print and its '24 outlook should provide more optimism on the sustainability of its recent share gains and its future potential," said UBS.
These expectations come amid numerous challenges, including concerns over the health of the U.S. consumer, potential food deflation, fluctuating demand for general merchandise, the distractions of U.S. elections, and high-interest rates.
UBS highlights Walmart's defensive nature, the potential for a rebound in discretionary spending, and unique sales and profit drivers as key advantages for the retailer. These drivers include the expansion of its marketplace, increased high-margin advertising revenue, and advancements in automation within its fulfillment operations.
The firm draws a parallel between Walmart's growing alternative profit sources and Apple (NASDAQ:AAPL)'s experience, where an increase in service-based revenues led to an expanded valuation multiple. UBS suggests that as Walmart enhances its alternative profit streams, it could similarly benefit from a higher stock valuation.
Walmart is expected to focus on these high-margin revenue streams throughout 2024, potentially guiding its earnings to fall within the $6.80 to $7.00 range, aligning with market expectations. The current consensus stands at $7.06. Based on these factors, UBS believes Walmart's stock remains an attractive investment opportunity.
InvestingPro Insights
Walmart (NYSE:WMT) has been a beacon of stability in the retail sector, and recent data from InvestingPro reinforces this narrative. With a robust market capitalization of $455.77 billion, Walmart stands as a heavyweight in the Consumer Staples Distribution & Retail industry. The company's commitment to shareholder returns is evident, as it has raised its dividend for 28 consecutive years, and has maintained dividend payments for an impressive 51 consecutive years, a testament to its financial health and consistent performance.
InvestingPro Tips highlight that Walmart is trading at a low Price-to-Earnings (P/E) ratio relative to near-term earnings growth, with an adjusted P/E ratio for the last twelve months as of Q3 2024 at 27.4. This might suggest a potential undervaluation when considering the company's earnings trajectory. Moreover, the Price/Earnings to Growth (PEG) Ratio stands at 0.33, indicating that the stock could be attractive based on its growth rate.
While the stock is trading near its 52-week high, with the price at 99.19% of this peak, analysts predict the company will remain profitable this year, with profitability over the last twelve months signaling a stable financial footing. As investors consider the insights provided by UBS, these InvestingPro metrics offer additional context to Walmart's financial landscape.
For readers looking to delve deeper into Walmart's financials and future outlook, there are additional InvestingPro Tips available, offering a comprehensive analysis of the company's performance and market position. Discover more about Walmart and access exclusive tips by visiting InvestingPro, and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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