Publication
Equity research - Walmart Inc.
| Summary: | Walmart Inc. (WMT) is a leading retailer and wholesaler that sells affordable food and non-food items through its “every day low prices” mantra. Each week, approximately 220 million customers visit the company’s 10,500 stores and clubs under 48 banners in 24 countries and eCommerce websites. In fiscal year 2021, WMT recorded half a trillion dollars in Revenue (the largest Fortune 500 company in the world) and employed over 2.3 million associates. WMT has a BUY recommendation with a 2022YE price target of $164.56/share, implying an upside potential of 20%, or a potential annualized return of 17%, from the October 1st, 2021 closing price of $137.05/sh., although with medium risk. The current undervaluation is mainly explained by the downward trend in operating margins over the last few years. The retail phase of selling uniformly through a “one format fits all” channel, where customers are served purely through brick and mortar stores, are gone. The modern-day customer requires an omnichannel approach where brick and mortar stores are integrated with online platforms to create a superior shopping experience. The dynamic process of selling products online, and its challenging economics, has been the main driver for the operating margin performance of Walmart. The present research studies the impacts of the investments announced by WMT’s Executive team from fiscal year 2022 onwards, and the potential outcomes of its operational performance. In the event that key operational risks materialize throughout the forecast horizon, the outlook for the Price Target changes to $127.2/sh., or a potential downside of 7% from the October 1st, 2021 price. A more optimistic scenario indicates a Price Target of $193.1/share, or a 41% upside potential. |
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| Main Authors: | Batista, Rui António Franco |
| Subject: | Walmart Inc. Retail & Wholesale Food Retail E-Commerce Equity Research Valuation Risk Analysis Comércio Retalhista & Grossista Retalho Alimentar Comércio Digital Avaliação de Empresas Análise de Risco |
| Year: | 2021 |
| Country: | Portugal |
| Document type: | master thesis |
| Access type: | open access |
| Associated institution: | Universidade de Lisboa |
| Language: | English |
| Origin: | Repositório da Universidade de Lisboa |
| Summary: | Walmart Inc. (WMT) is a leading retailer and wholesaler that sells affordable food and non-food items through its “every day low prices” mantra. Each week, approximately 220 million customers visit the company’s 10,500 stores and clubs under 48 banners in 24 countries and eCommerce websites. In fiscal year 2021, WMT recorded half a trillion dollars in Revenue (the largest Fortune 500 company in the world) and employed over 2.3 million associates. WMT has a BUY recommendation with a 2022YE price target of $164.56/share, implying an upside potential of 20%, or a potential annualized return of 17%, from the October 1st, 2021 closing price of $137.05/sh., although with medium risk. The current undervaluation is mainly explained by the downward trend in operating margins over the last few years. The retail phase of selling uniformly through a “one format fits all” channel, where customers are served purely through brick and mortar stores, are gone. The modern-day customer requires an omnichannel approach where brick and mortar stores are integrated with online platforms to create a superior shopping experience. The dynamic process of selling products online, and its challenging economics, has been the main driver for the operating margin performance of Walmart. The present research studies the impacts of the investments announced by WMT’s Executive team from fiscal year 2022 onwards, and the potential outcomes of its operational performance. In the event that key operational risks materialize throughout the forecast horizon, the outlook for the Price Target changes to $127.2/sh., or a potential downside of 7% from the October 1st, 2021 price. A more optimistic scenario indicates a Price Target of $193.1/share, or a 41% upside potential. |
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