Walmart Stock Price Forecast February 2022 – Time to Buy WMT Stock?

Walmart (WMT) stock gained over 4% in yesterday’s price action and has now bridged its 2022 losses to around 4%. The stock is still down almost 9% from its 52-week highs.

Retail stocks have been in focus after data showed that US retail sales increased 3.8% on a seasonally adjusted basis in January. While higher inflation has taken a toll on the monthly budgets of many Americans, their spending appetite has stayed strong, partially because of a booming job market.

Walmart stock has largely been trading sideways for the last year. What’s the forecast for WMT stock and should you buy it in February 2022?

Walmart stock recent developments

Walmart reported revenues of $152.9 billion in the fiscal fourth quarter of 2022, which was 0.5% higher than the corresponding period last year. The revenues were negatively impacted by $10.2 billion due to the asset divestitures. Nonetheless, the revenues were higher than the $151.5 billion that analysts were expecting. The company’s adjusted EPS of $1.53 was also slightly better than the $1.50 that analysts were expecting.

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Key operating metrics

Walmart’s same-store growth without fuel increased 5.6% in the quarter, which was in line with analysts’ estimates. Grocery sales increased by high single digits and the company gained market share in the category in the quarter.

The company’s e-commerce sales increased only about 1% from the corresponding period in the last year. As Walmart’s stores have reopened customers have restarted shopping at the physical stores which is reflected in low growth in online sales. However, when compared on a two-year basis, the company’s online sales increased 70%.

Sam’s Club

Sam’s Club also saw strong growth in the quarter and the total memberships increased by 9.2% in the quarter while sales increased 10.4%. The company does not provide the absolute number of Sam’s Club members.

John Furner, president and CEO of Walmart US said “We’re seeing about the same number of rollbacks now that we had at the end of Q1 last year so we have supply-chain challenges and other costs coming through.” He added, “The team did do a nice job managing mix and pricing and are looking after both our customers and our shareholders.”

Walmart International

Walmart’s International operations reported sales of $27 billion, which was 22.6% lower than the corresponding period last year. The fall in sales was led by asset divestitures and its business in Mexico, China, and India where it owns Flipkart delivered strong numbers.

Walmart increased dividend

Walmart repurchased $9.8 billion worth of its shares last year and intends to repurchase $10 billion worth of shares in the fiscal year 2023 as well. The company also raised its quarterly dividend from $0.55 to $0.56. The company has been raising its dividend for 49 consecutive years now. At current levels, the dividend yield is around 1.6% which is slightly above the S&P 500’s dividend yield.

Guidance

Walmart expects its total sales to rise 4% in this fiscal year while the US same-store sales are expected to rise 3%. The company expects sales growth to be tepid in the first quarter on tougher YoY comps. Last year, US retail sales have got a boost from the stimulus cheques.

Walmart expects its adjusted EPS to increase in the mid-single digits in the current fiscal year which is higher than what analysts were expecting. The company also reiterated its long-term financial projections.

Retail companies are facing headwinds

US retail companies are facing multiple headwinds. Higher inflation has meant that people have lower disposable income. Importantly, higher gasoline prices have meant that people have lower money to spend on other discretionary items. This would especially be a problem this year as more people start commuting to offices.

Finally, as people spend more on outdoor activities like restaurants, movies, gyms, and travel, retail spending might see a slowdown.

Walmart stock forecast

Wall Street analysts are bullish on Walmart stock and it has a consensus buy rating. Of the 38 analysts covering the stock, 28 have a buy rating while the remaining 10 have a hold rating. None of the analysts have a sell rating.

It has a median target price of $170 which is a 22.4% premium over current prices. The street high target price of $190 is a premium of 37% while the street low target price of $136 is 2.1% below current price levels.

WMT stock target price

Ahead of Walmart’s earnings release, Oppenheimer had reiterated its outperform rating and advised investors to buy any post-earnings dip. “We expect another solid top-line showing, but have less conviction on the bottom-line upside potential given a variety of headwinds and tail winds related to Covid-19 and cost pressures,” it said in its note.

After the earnings release, Scot Ciccarelli, a retail analyst for Truist Securities said that he is cautious on the stock and expects low- and middle-income families to lower their spending amid higher prices.

Meanwhile, over the long term, Walmart’s investments into e-commerce and the supply chain would add value. It also has a strong position in India through Flipkart.

Should you buy Walmart stock?

Walmart stock trades at an NTM (next-12 months) PE multiple of 20.9x which is below the average multiples over the last three years. The multiples look reasonable even as there are concerns over retail stocks amid multiple headwinds. However, if you are looking to buy a retail stock for the long term, WMT is one stock that should be on your radar.

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