Shares of Walmart (WMT - Free Report) popped Wednesday following news that the company is expanding its grocery delivery offerings as rivals Kroger (KR - Free Report) , Target (TGT - Free Report) , and Amazon (AMZN - Free Report) do the same. Plus, Barclays reinstated coverage of WMT stock at “overweight.” The question is should you buy Walmart stock at the moment?
Walmart announced on Wednesday its plans to roll out more grocery delivery options in order to try to reach its goal to make its at-home grocery delivery available in 100 metro areas by the end of the year. The retail powerhouse is launching a new “last-mile delivery pilot” called Spark Delivery. Walmart’s new delivery system will use Delivery Drivers, Inc to help find the drivers, who will use their own cars to make Walmart deliveries.
Walmart is currently testing the new Spark Delivery offerings in Nashville and New Orleans. “We are excited to partner with Walmart to allow them to focus on providing great products while we can build and support a professional driver network to focus on the delivery side of the business,” Delivery Drivers CEO Aaron Hageman said in a statement.
Barclays reinstated coverage of Walmart shares with an “overweight” rating, citing the retailer's investments back into its own business as a major reason for the optimism. Analyst Karen Short also initiated her WMT price target at $110 per share, which marked over a 15% upside to Tuesday's closing price of $95.36. “We believe that Walmart will be able to sustain comp gains over peers going forward," Short wrote in a note to clients Tuesday.
“We believe this is a function of a stronger assortment, improved quality of fresh products, goals for stores to be 'clean, fast, and friendly,' wage increases [etc.]”
Walmart’s second-quarter revenues jumped by 3.8% to reach $128 billion. Better still, Walmart’s U.S. comparable store sales popped 4.5% and its e-commerce sales soared by 40%. The company noted that it posted its highest domestic same-store sales growth in more than 10 years, driven by its grocery and apparel businesses.
The company also recently announced that it is officially the largest shareholder in Flipkart Group, which is one of India’s largest e-commerce sites. Walmart now owns roughly 77% of Flipkart, while other well-known investors, including Tencent (TCEHY - Free Report) and Microsoft (MSFT - Free Report) , also remain. The investment is set to help Walmart break further into one of the world’s largest countries, where Amazon is also making a big push.
Walmart stock is currently trading at 20.1X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to the S&P’s 17.5X and its industry’s 17.2X. WMT stock has traded as high as 23.8X over the past year, but it is currently trading above its year-long median of 18X and its year-long low of 16.5X. Plus, as investors will see, WMT is currently trading near its 10-year high, which means its valuation appears a bit stretched.
Moving on, our current Zacks Consensus Estimates are calling for Walmart’s quarterly revenues to pop by 0.81% and full-year revenues to jump 2.7% to hit 513.64 billion. These numbers don’t jump out, but when you are pulling in half a trillion dollars and you have been around for a long time, it’s hard to churn out major top-line growth.
Investors will be more pleased to see that Walmart’s adjusted quarterly earnings are projected to climb by 3% to touch $1.03 per share, with its full-year EPS figure expected to expand by over 8% to $4.78.
Walmart has seen mixed earnings estimate revision activity recently, which helps it land a Zacks Rank #3 (Hold). Yet, WMT stock might be worth considering at the moment as more investors realize the giant is ready to thrive in the new retail world.
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