MB, I couldn't find the article I was looking for, it was more upbeat for WMT than this one is:
Walmart Might Not Get a TikTok Boost. Its Sale Outlook Isn't Great Either. -- Barrons.com
11:08 am ET August 31, 2020 (Dow Jones) Print
By Teresa Rivas
From Covid-19 shopping sprees to TikTok hopes, Walmart has had a great 2020. However, with the stock up 15% year to date, R5 Capital worries that it's gotten ahead of itself, and the firm's downgrade is hurting the shares Monday.
Analyst Scott Mushkin downgraded the shares to Hold from Buy, with a $147 price target. He's quick to point out that the move isn't based on any wavering in is belief that the company's outlook, as it "has a bright future and all the ingredients to be a long-term winner"; rather, he's concerned about a "more muted outlook for sales over the next 12 months."
His research shows that a reduction in employment benefits will weigh on Walmart's top line, and that looks like a problem that will continue, as he's projecting personal disposable income to contract through the second quarter of next year at least.
That could be a problem for a number of retailers, but Mushkin notes that "Walmart's core customer is being particularly impacted by the current economic climate." Add to that the fact that its valuation (at more than 25 times forward earnings) looks high, compared with where it trades historically, and his caution on its bid for TikTok with Microsoft (MSFT) given its recent M&A record, and he sees reason for near-term caution.
Walmart is down 2.8% to $136.36 in recent trading. Mushkin isn't alone in worrying about the impact of less government help on the company's sales going forward, as that was a big reason the stock traded lower after its recent earnings report, which was otherwise ahead of expectations. Yet other analysts are more optimistic about the value of owning TikTok.
Write to Teresa Rivas at teresa.rivas@barrons.com
