Following a vicious selloff in the previous session, Walmart Inc.’s shares continued to decline on Friday as investors ignored analysts’ encouraging remarks.
However, investors seized Walmart’s longer-dated issuance, resulting in net purchase of its investment-grade notes in the corporate bond market.
Christopher Horvers, an analyst at J.P. Morgan, reported that Walmart’s stock (WMT) offers a “near-term buying opportunity” at current prices and reaffirmed an overweight rating with a target price of $122 per share.
Walmart’s stock is still a good investment, according to Roth Capital analyst Bill Kirk, who increased his price objective from $97 to $108.
Nevertheless, Walmart’s stock dropped 3% as it continued to decline during Friday’s trade.
Horvers of J.P. Morgan stated that the response to Walmart’s forecast was “worse than reality,” despite the fact that it really reflected a better consumer environment rather than a weaker one.
Although Walmart’s management has expressed greater confidence in its profit forecasts, he warned that the company’s near-term rate of margin expansion might be slower than anticipated.
According to Horvers, Walmart will still attain a 6% operating margin for its U.S. sector and a 6% operating margin for its foreign segment over the next three years by investing in its business.
“We believe management is making these investment decisions from a position of strength and, ultimately, the profitability throttle is in their hands,” he stated.
The stock dropped 6.5% on Thursday, closing at $97.21 per share. Walmart’s warning that quarterly earnings may drop for the first time in three years caused it to perform the poorest in the Dow Jones Industrial Average (DJIA).
According to Horvers, Walmart’s lower-than-expected profit expectation was mostly caused by deferring costs related to the integration of the smart-TV company Vizio, which was purchased a year ago, and by February having one fewer day this year than it did last year.
“[Walmart] is taking its typically conservative [tack] starting out the year,” he stated.
Kirk of Roth Capital said that Walmart’s profit outlook was better than its initial projections given to analysts, excluding calendar effects and merger and acquisition expenses.
“We do not believe operations have changed in any meaningful way from [fiscal 2025] results,” Kirk stated. “Walmart’s share gains will continue, as they increasingly offer compelling value and convenience; and with conservative guidance, the beat/raise story should resume.”
Despite Thursday’s selloff, analysts made a number of encouraging statements, including those from J.P. Morgan and Roth Capital.
According to data from BondCliQ Media Services, capital inflows were attracted to Walmart’s corporate bonds despite the stock’s decline (see chart below).
Walmart’s longest-dated bonds, which matured in 2053, saw the most action as investors placed bets that the retailer’s longer-term prospects would continue to be favorable.
