Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Walmart share price: What’s in store for Q4 earnings?
  • Earnings

Walmart share price: What’s in store for Q4 earnings?

With the world’s biggest retailer’s stock stuttering in 2020, is there room for gains in Walmart’s share price if the firm posts solid numbers in its latest earnings report?

Once synonymous with the stagnating and out of touch big-box retail sector, set to be put out of business by e-commerce upstarts, Walmart [WMT] has in recent years transformed itself into one of the few legacy retailers capable of competing with Amazon [AMZN].

In 2018, Walmart surpassed Apple to become the third-largest online retailer in the US behind Amazon and eBay, while globally it has been fighting pitched battles for e-commerce dominance in a number of markets. That includes India, where it beat out Amazon to acquire a majority share in Flipkart, which is projected to overtake Amazon as the county’s biggest online shopping site by 2023. Positive share price momentum was felt as a result.

The stock continued its 2018 gains into 2019, seeing a 29.7% increase in share price value, marginally short of the S&P 500’s returns of 30.5%. Since the turn of 2020, however, Walmart’s share price has stuttered and is down 0.88% as of 14 February.




So with Walmart set to release its earnings for the quarter ending January 2020 (fiscal Q4 2020) on 18 February, what will the report need to show in order to trigger a turnaround in the company’s share price fortunes?


Ups and downs

The firm’s ability to grow its e-commerce sales while maintaining a domineering physical retail presence — the firm still brings in roughly double the total revenue of Amazon — has led to some solid share price growth in recent times. After a number of stagnant years, the stock has picked up, gaining 35% from the start of 2017 to the end of 2018.

This share price performance has not shown through so far in 2020. A boost in both in overall sales, as well as online, would help force a turnaround for the ailing stock. But as Walmart is already the world’s largest retailer, achieving significant levels of growth will be difficult to achieve.

Analysts expect moderate overall sales growth to continue to reach $142.5bn, which would represent gains of 2.7% year-on-year. That’s slightly higher than last quarter’s gain of 2.5% and the 1.9% gained in Q4 2019 over the previous quarter. Matching this should see the stock avoid a major plunge, but may not be enough to trigger a big change in narrative.


Expected Q4 sales - a 2.7% year-on-year increase


For context, in the last quarter, the stock beat consensus estimates to bring in $1.16 adjusted earnings per share compared to the $1.09 expected by Refinitiv’s survey of analysts, hailing a consecutive 21 quarters of US growth.

This beat wasn’t enough to boost the firm’s value though, and since then Walmart’s stock price has failed to consistently hold a price above its pre-earnings value of $120.98 per share.


Digital drivers

The uptick in Walmart’s share price since 2017 has been in large part thanks to the company showing solid e-commerce growth. In May 2017, it revealed that e-commerce sales were up 63% over the previous year.

But Walmart hasn’t been able to maintain such high levels of growth and while the gains remain, they are slowing — in the last three quarters, e-commerce sales were up 37%-41% over the same quarter in the previous year.

In the eyes of many investors, this is a big problem. Despite being the fifth-largest online retailer in the US, Walmart made up just 4.6% of US online sales in 2019, compared to the 35% Amazon is estimated to have fulfilled.


US online sales made up by Walmart, compared with 35% from Amazon


If the company can report growth in e-commerce sales at 41% or more this quarter, that could provide a solid boost for the stock. However, if it comes under the 37% mark, traders could be set to see a further dip in Walmart’s value. When the company’s earnings for the same quarter two years ago revealed that e-commerce sales had grown just 23%, the stock fell the most it had in one day in 30 years — it never recovered in 2018.


Market Cap $334.475bn
PE ratio (TTM) 23.58
EPS (TTM) 5.00
Operating Margin (TTM) 4.18%

Walmart share price vitals, Yahoo Finance, 17 February 2020


Room to run?

One argument is that with Walmart’s price resting below its 50-day moving average since the end of December 2019, and with there not being any particular reason as to why the stock underperformed the wider S&P 500 in 2019, there is room for it to gap up if the earnings report brings the slightest bit of positive news.

Of 32 analysts recently polled by CNN, 21 rate the stock a buy or outperform, while 10 rate it a hold and one underperform.

The consensus price target for the stock stands at $130, according to The Wall Street Journal, which represents a potential upside of near 11% compared to its $117.44 price recorded on 13 February 2020.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Latest articles