Click me
Transcribed

Walmart (WMT) Bull Bear Case

Bull/Bear Case Walmart * Save money. Live better. Bull case Bear case If Walmart successfully executes its expansion plans, its revenue growth rate can match bullish analysts' estimates of 5.4% growth in FY15. If this can be achieved, Walmart's P/E multiple will reach a five-year high of 16x. If Walmart fails to execute its expansion plans and continues losing customers to Costco, its P/E multiple can contract to its five-year average of 13x. There is a large difference (nearly 3.3 percentage points) between Costco and Walmart's 5yr compound annual growth rates, which Walmart will find extremely difficult to catch up to. At a P/E multiple of 16x and bullish earnings estimates of $5.9 for FY15, Walmart's stock will trade at $94. At a P/E multiple of 13x, Walmart's stock price will be $71, using bearish earnings estimates of $5.49 for FY15. Walmart plans to increase the number of its Neighborhood Market stores* to more than 500 by March 2015, from 300 in September 2013. Walmart's reliance on discounts and traditional stores for sales growth will pose challenges as far as improving operating margins is concerned. The move from large Supercenters to smaller sized neighborhood will help Walmart capture the market share of smaller retailers, thereby increasing its efficiency and boosting revenue growth. Walmart's slower revenue growth rate exposes it to the risk of losing market share to Costco. Neighborhood market stores* will allow customers instant access to Walmart, without requiring them to travel to Supercenters, which are located far away from urban centers. The resultant increase in sales will mean better overall gross margins for Walmart, as neighborhood market stores generally operate at higher gross margins compared to larger stores. Walmart will continue to lose more customers to Costco because of the better customer service and shopping experience offered by its competitor. *Neighborhood market stores have an average size of 38,000 sq. ft., which is nearly one-fifth the size of a Supercenter. SOURCES: Company Data, SEC-filings Bidness Etc estimates BIDNESS etc. DISCLAIMER: Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this website are the property of their respective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc.

Walmart (WMT) Bull Bear Case

shared by alstonalston on Apr 17
45 views
0 shares
0 comments
The bull case for an investment in Walmart stock is based on the effective execution of its expansion plans. The company is investing in Neighborhood Market stores, e-commerce and international expans...

Tags

None.

Category

Business
Did you work on this visual? Claim credit!

Get a Quote

Embed Code

For hosted site:

Click the code to copy

For wordpress.com:

Click the code to copy
Customize size