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Walmart stock forecast: Record sales but dismal earnings in Q1?

By Prachi Sinha

Edited by Vanessa Kintu

13:52, 19 May 2022

Walmart stock forecast: Record sales but dismal earnings in Q1? People shopping at a Walmart store in south San Francisco bay area
Walmart stock forecast: Record sales but dismal earnings in Q1? Photo: Sundry Photography / Shutterstock.com

Founded in 1962, headquartered in Arkansas, US, Walmart (WMT) operates with a focus on generating higher volume sales through affordable pricing. The retail corporation operates over 10,500 stores in 24 countries. 

According to Statista, in 2021 Walmart was the world’s largest company in terms of revenue. It was also the largest based on employee numbers, with over 2.3 million people on its payroll – 1.6 million in the US alone.

The retailer says it aims to improve the lives of people by providing easy access to affordable food and products. On 18 April 2022, Walmart and its subsidiary Sam’s Club hit a milestone of 7 billion pounds of food donated to Feeding America member food banks.

The CEO of Feeding America, Claire Babineaux-Fontenot, said of Walmart’s contributions: 

“To give you a sense of scale, in one year during the pandemic, about 60 million people turned to the charitable food system for help. And our network provided 6.6 billion meals. With that understood, it gives you context to the extraordinary partnership that we have with Walmart and Sam’s Club – the largest donor of food in our whole network.” 

On 17 May 2022, Walmart released its first quarter results for fiscal year 2023, reporting total revenue of $141.6bn, beating the Bloomberg consensus of $139.09bn. However, profits for the quarter remained disappointing and projected a 23% decrease year-over-year (YoY). 

Will high inflation eat into Walmart’s stock value? Join us as we undertake an analysis and review forecasts for the Walmart future stock price.

Walmart stock fundamental analysis

For the period ended 30 April 2022, Walmart released its Q1 financial results on 17 May 2022. Consolidated operating income for the quarter was reported at $5.3bn.

With inflation at a near four-decade high in the US, operational costs weighed heavily into the company’s earnings. The overall costs and expenses were $136.2bn, approximately $4.8bn higher than in Q1 2022.  

In its earnings presentations, Walmart further reported that its operating expenses as a percentage of net sales also remained increased by 45 basis points, primarily driven by higher wages catering to its business in the US.

Taking the heat of the global supply crisis, the retailer has faced cost pressures and in-stock challenges in the previous quarter as well. In its Q4 FY 2022 earnings call, it was mentioned that the company had to bear higher than anticipated supply chain costs of over $400m for its US business alone. Although, some of these logistics cash outflows are expected to subside.

Walmart’s strategic disinvestments from its businesses in the UK, Japan and Argentina have also adversely affected the company’s overall earnings. Its overseas unit, Walmart International, has made some deliberate changes in its functioning since the pandemic.

In November 2020, it sold Walmart Argentina to Latin American group Grupo de Narváez. In March 2021, it also sold off its majority stake in the Japanese supermarket Seiyu to KKR and digital commerce company Rakuten. 

On 16 February 2021, Walmart completed the sale of its wholly owned UK grocery chain Asda to Issa Brothers and TDR Capital. It was acquired for an enterprise value of $6.8bn, on a debt-free and cash-free basis. 

While this aligns with the company’s broader strategy of divesting from less-profitable markets and increasing exposure to higher growth markets, these divestitures have led Walmart International net sales to decrease by 13.0%.

From its three reportable business segments of Walmart US, Walmart International and Sam’s Club, the highest increase in net sales was observed in Sam’s Club at $1.96bn, a 17.5% increase YoY from $1.66bn. Operating income, however, across all three segments remained lower on an annual comparison. 

Q1 net sales and operating income

Doug McMillon, president and CEO of Walmart, commented on the company’s earnings: 

“Bottomline results were unexpected and reflect the unusual environment. US inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.” 

In its guidance for fiscal year 2023, the company expected consolidated net sales to increase by 4%, in constant currency terms. By excluding the impact of divestitures, this increase was anticipated to be in the range of 4.5% to 5%. For its bottom-line, however, Walmart expected the earning per share (EPS) to remain decreased by 1% through the year.

Walmart’s flywheel proposition

In December 2020, Walmart eliminated the $35 floor shipping price on its website for Walmart+ members. Members also benefit from free next-day and two-day shipping, regardless of the total cost of their shopping basket. 

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Chief customer officer Janey Whiteside said:

“No other membership allows customers across the country to get everything from gingerbread cookies and eggnog to holiday decorations and toys delivered for free as soon as the same day. Walmart+ is designed to make life easier – giving customers an option to not have to sacrifice on cost or convenience.”

The retailer has also been pushing its flywheel proposition with the aim of increasing membership on Walmart+. 

On 25 February 2020, Walmart launched Walmart Fulfilment Services (WFS), which allows sellers to take advantage of the retailer’s premium supply chain capabilities of packing, shipping, storage, etc. This is aimed at generating more profitable sales for sellers and offering a larger choice of brands to customers.

Walmart’s flywheel

However, according to research conducted by Market Pulse, from a total pool of more than 85,000 sellers on the marketplace, just over 1,000 are using the WFS platform.

In a continued push to get more sellers to sign up for WFS, Walmart recently introduced its New-Seller Savings promotional scheme. A limited time savings scheme for new sellers on the Walmart Marketplace. Any seller who joins the company’s marketplace by 31 May 2022 and starts selling its products on the company’s website by 30 June 2022, will receive a 50% discount on commission rates for the first 90 days.

Walmart stock analysis

Walmart (WMT) 5-year stock price chart

Walmart’s historical stock price dipped to the low of $134.53 on 24 February 2022 amid mounting tensions between Russia and Ukraine. However, with the release of its annual report on 21 April, the stock reached its highest stock price to date at $159.87.

In his annual letter to shareholders, McMillion wrote: 

“Our strategy is clear. It’s to build strong local businesses that share common flywheel characteristics, powered by Walmart with ideas, resources, talent and technology.” 

More recently, with the Q1 financial results announced on 17 May, the WMT stock fell to $131.35. Compared to the start of 2022 close price of $144.65, the stock has decreased by 9.19%.

Sharing his view on Walmart stock market and stock future forecasts, Milan Vaishnav, CMT, MSTA, consulting technical analyst at Gemstone Equity Research & Advisory Services said:

“WMT tested a high near 160 following a channel breakout. Presently, it is seeing a corrective retracement. The stock has strong support in the 140 to 143 zone, which also comprises of 100, and 200-day moving average (MA).The retail sector overall is relatively outperforming the broader S&P 500 Index and so is this stock with its relative strength line rising, in firm uptrend, and above the 50-day MA. The stock can be purchased while using the level of 140 as a protective stop. On the upside, the stock may test the levels of 160 to 168 levels in the near term.”

Walmart stock projections

As of 18 May, data compiled by Market Beat showed 19 of 27 analysts rated WMT stock a ‘buy’ and 8 a ‘hold’. Their consensus 12-month Walmart share price forecast target was $159.11, varying from the low of $134 to the high of $181. The analysts’ price target consensus had an upside of 26.77%, based on the last closing price of $131.35 

Forecasting service Wallet Investor set its Walmart stock price target at $159.804 for December 2022. Its Walmart stock forecast 2025 had the stock at $207.933 by December. 

AI Pickup projected the stock price would reach $206.3 in 5 years-time, before declining to an average of $148.85 by 2030.

After the Q1 FY’23 financial results were posted, several equity analysts revised their stock expectations. Goldman Sachs adjusted its stock price target to $160 from $180, but continued to maintain its ‘buy’ stance. 

Stifel Nicolaus offered a ‘hold’ rating and decreased its price target to $150 from $155. Lastly, JP Morgan maintained its neutral position on WMT stock and made no change to its price target of $141. 

When looking for Walmart stock predictions, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ projections are based on making fundamental and technical studies of Walmart stock news and performance. Past performance is no guarantee of future results. Always do your own research. And never invest money you cannot afford to lose.

FAQs

Is Walmart a good stock to buy?

Walmart has reported strong revenues in Q1 FY 2023 but missed its earning expectations by a significant margin due to rising inflation. Its international business has made strategic disinvestments from certain regions to deepen its footprint in more promising markets, the benefits of which remain to be seen. 

Whether Walmart stock is a suitable investment depends on your own investment objectives. You should conduct your own research and then make a decision regarding Walmart stock buy, sell or hold. It’s important to reach your own conclusion on a company’s prospects and the likelihood of achieving analysts’ targets.

Will Walmart stock go up?

As of 18 May, Wallet Investor expected WMT stock to increase to $159.804 by December 2022. However, analysts’ forecasts can be wrong and have been inaccurate in the past. Always do your own research before investing. And never invest more money than you can afford to lose.

Where will Walmart stock be in the next 5 years?

Forecasting service AI Pickup believed that Walmart stock could reach $206.3 by May 2027. 

Note that analysts’ forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

Why has the Walmart stock price been going down?

The most recent dip in the WMT stock was recorded on 17 May 2022, with its stock falling by nearly 10% due to its disappointing profits for Q1 FY 2023.

Does Walmart stock pay dividends?

For Q1 FY’23, Walmart declared dividends of $1.5.

When will Walmart stock split?

Walmart has not announced a stock split since March 1999.

Markets in this article

WMT
Wal-Mart Stores Inc (Extended Hours)
88.54 USD
1.34 +1.540%

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