Walmart stock is a buy on any dip

Walmart New York Stock Exchange: WMT it is in an uptrend and will likely continue. The fourth quarter results and outlook for 2024 reinforce the expectation of capital returns and improved shareholder value of these retail stocks. However, the impending 3-for-1 stock split poses a problem for the market, which could lead to a sell-off. The bottom line is that Walmart stock is in an uptrend with a potential buying opportunity at hand.

The stock split is scheduled for February 26. The move is due to Walmart’s upward price trend and its impact on the employee stock purchase program. The company is increasing the number of shares to reduce the stock price to a range it believes is more attractive to employees. At lower levels there will be greater participation and less partial share issuance, factors that contribute to Walmart’s investment attractiveness. Buy-and-hold investors help reduce volatility; this means that for Walmart and its investors the beta is close to 0.6X.

Walmart has a solid fourth quarter and provides favorable guidance

Walmart reported a solid quarter with better-than-expected network growth. The company reported net revenue of $173.39 billion, up 5.9% from last year, beating the Marketbeat.com consensus of $3.4 billion. The gains were driven by a 4% increase in the U.S., a 17.6% increase in International and a 2% gain for Sam’s Club. eCommerce is a driving force across the system, up 23% %, and is expected to remain strong as consumers rely on same-day delivery and pickup.

Among the critical details is Walmart’s industry-leading performance. Q4 sales are nearly 2x higher than Q4 industry estimates, suggesting it perhaps gained share from other retailers Target New York Stock Exchange: TGT. Furthermore, Sam’s Club’s growth has been slow and suggests similar results from Costco Wholesale NASDAQ: COST AND BJ Wholesale Club NYSE: BJ.

The margin is an area of ​​strength. The company improved its gross margin by 39 basis points and controlled costs to increase adjusted operating profit by 13.2%. GAAP results fell due to one-time factors related to investment gains, but adjusted rose 5.3% year over year to $1.80 or $0.15, better than expected.

The only uncertain news is the driving. The company provided solid guidance with expected growth, but only in line with analyst consensus. Normally the guidance would not be a catalyst for a new all-time high. However, it is sufficient to support a healthy balance sheet by investing in growth, paying dividends and repurchasing shares.

Walmart acquires Vizio to expand its advertising business

Walmart announced a deal to buy Vizio worth $11.50 per share to VZIO investors. The move is aimed at strengthening the company’s advertising business, the engine of growth. The advertising business grew 33% globally and about 20% in the United States, Vizio’s largest market. Vizio makes a line of smart TVs and home entertainment products that use its SmartCast platform. While Vizio’s core business won’t move the needle much for Walmart, it should be able to leverage the platform for ad serving. The question is, does Walmart’s move into advertising and Vizio mean that consumer markets are being exploited?

Walmart also announced a 9% dividend increase and the repurchase of 18.2 million shares. The buybacks reduced the number of diluted shares by 1.1% in 2024 and are expected to continue apace in 2024. The dividend increase brings the payout to approximately 1.35% relative to the price action before release, and future increases are still likely. The payout ratio is less than 35%, so this Dividend King could sustain increases for years with or without earnings growth.

The technical outlook: Walmart rises to new high

Fourth-quarter results and 2024 forecasts catalyzed a new high for Walmart. The stock rose about 3% in premarket trading and could rise another 4% to 9%. The rising consensus target suggests an upside of around 4%, while the most recent targets suggest another 5% or more, with further revisions expected soon. If the analyst revises upward, the 4% to 9% target could represent a minimal gain for 2024.

The chart is bullish, the uptrend is intact, but the market is overbought. The stock split will provide a significant opportunity for profit takers and could limit gains. In this scenario, waiting until after the split for market support to re-establish may be the best choice.

Before considering Walmart, you’ll want to hear it out.

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