Investors weren’t impressed with Walmart Inc (NYSE:WMT) latest earnings report, and at least one Wall Street analyst has had enough. Oppenheimer analyst Rupesh Parikh downgraded the stock on Friday, knocking his rating from Outperform to Perform, while also cutting his price target on WMT to $93 (from $110).
Parikh commented, “WMT represents the world’s largest retailer and an increasingly powerful, yet still up-and-coming, omni-channel juggernaut. We remain upbeat on the strategic direction at WMT. As a stock, WMT has historically struggled to sustain an above-market P/E multiple. We are increasingly concerned that with recent key drivers of outsized e-commerce sales expansion potentially waning and given our now more muted EPS growth expectations, the valuation at which shares trade could prove capped. As a result, we no longer see the case for outperformance.”
“We are trimming our FY19 (Jan. 2020) estimate to $5.15 from $5.23, on our updated outlook for a more muted rebound in operating income growth, owing to ongoing gross margin headwinds and cost pressures, offset by the lapping of increased investment spending related to tax reform,” the analyst added.
To the company’s credit, the analyst continues to look favorably on a number of key fundamental positives in the story, including a seemingly stronger comp trajectory for US stores, improved underlying financial discipline, and an expanding omni-channel presence.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rupesh Parikh has a yearly average return of 16.9% and a 61% success rate. Parikh has a -3.6% average return when recommending WMT, and is ranked #191 out of 4754 analysts.
Analysts seem to be divided on the stock as 8 recommend buying shares of Walmart, while other 8 suggest to stay on the sidelines. The average 12-month price target between these 16 analysts is $107.79, marking a 22% potential upside from current levels.