Source: PaxForex Premium Analytics Portal, Fundamental Insight
Walmart, widely recognized for its low-margin, discount pricing model, has experienced several financially prosperous years, largely attributed to its strategic investments in technology.
The company's financial results for the fiscal year ending January 31, 2024, and the quarter ending April 30, 2024, highlight robust growth. An increasing number of customers are frequenting Walmart's physical stores and utilizing its online platforms. Consequently, Walmart's stock has surged to 52-week highs. For the fiscal year 2024, the company's performance has convincingly supported its current stock valuation. Consolidated revenue saw a 5.5% rise in constant-currency terms. GAAP net earnings per share were reported at $5.74, increasing to $6.65 on an adjusted basis. Moreover, the company generated $15 billion in free cash flow, reflecting a $3 billion increase from the previous year.
Investors will likely be particularly interested in the 23% surge in e-commerce sales during the fourth quarter of fiscal 2024 and the 28% increase in global advertising revenue for the entire year. This positive trend persisted into the first quarter of fiscal 2025, with e-commerce sales rising by 21% and advertising revenue climbing by an additional 24% year-over-year.
These results underscore Walmart's effective strategy that resonates well with its customers. Known for its low-margin, in-store retail business, Walmart has seen significant growth in higher-margin areas such as advertising and e-commerce. This development offers a promising outlook for overall margin expansion in the future. Cultivating these high-margin revenue streams is likely to drive further increases in Walmart's stock price. The key question remains whether Walmart can maintain this impressive performance over the long term.
Riding a wave of positive financial news, Walmart is optimistic about its future prospects. This confidence is demonstrated by the company’s decision to raise its dividend by 9% for the current fiscal year, resulting in a new annual dividend of $0.83 per share, yielding approximately 1.3%. Additionally, Walmart still has over $15.5 billion available for its share repurchase program.
The anticipated acquisition of Vizio, which is currently under regulatory review, is expected to further boost Walmart's advertising revenue. Reflecting its strong market position, Walmart has announced that net sales and operating income for the current fiscal year are expected to meet or exceed initial forecasts.
Walmart's impressive results and growth potential stand out, especially when compared to its competitor, Target. Although Target may currently offer more attractive valuation metrics, Walmart's robust sales, cash flow, and net income growth suggest that future dividend increases are likely, particularly given its dividend payout ratio is 25% lower than Target's.
While Walmart's shares may appear more richly valued, the current share price does not fully capture the company's success in attracting shoppers. In contrast, Target has reported sales declines for the most recent full year and quarter.
Walmart's rising sales, expanding non-core revenue streams, and strong cash flow supporting dividend growth make it clear that Walmart represents the better value. Despite reaching 52-week highs, Walmart stock continues to offer investors a superior opportunity for growth in earnings, dividends, and multiple expansions
As long as the price is above 63.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 65.11
- Take Profit 1: 67.00
- Take Profit 2: 70.00
Alternative scenario:
If the level of 63.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 63.00
- Take Profit 1: 61.00
- Take Profit 2: 58.00
