Economy Walmart stock could get a crater after executives held...

Walmart stock could get a crater after executives held their big investor day in 2020

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Walmart (WMT) has been a fairly straightforward story for investors for most of the year. “data-reactid =” 15 “> Walmart (WMT) was a fairly straightforward story for most of the year.

But the million dollar question now is whether that will change much.

The Bentonville Bruiser will host a closely watched meeting with the investment community on the New York Stock Exchange on February 18. It is expected to be quite a hurricane for executives and sell-side analysts. Not only will Walmart lower its fourth quarter profit at 6:00 a.m.CET and share its original outlook for 2020, the management team will also give detailed presentations on the state of affairs to the world’s largest retailer.

Hopefully the caffeine from Walmart’s Great Value private label soda flows hard into the room.

<p class = "Canvas Atom Canvas Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Before the financial spectacle, Walmart finds its holdings. The Walmart share is fell 3.2% in the last three months via Yahoo Finance dataand lagged behind the 6.3% rise in the Dow Jones Industrial Average. The S & P 500 achieved an impressive 9.5% during this time. “Data-reactid =” 19 “> Before the financial spectacle, Walmart finds that its stock is lagging behind what was another collapse in the broader markets. Walmart says stocks have been up 3 in the last three months, according to Yahoo Finance data , Fell 2%, below the 6.3% rise in the Dow Jones Industrial Average, while the S&P 500 has reached an impressive 9.5% over the same period.

Based on our chats with sources, the weakness in Walmart stock is currently due to several factors. Taken together, these factors raise the question of whether Walmart will be the inventory that it couldn’t miss in 2019 for most of 2019.

Here are some concerns we hear.

<h3 class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The target effect“data-reactid =” 22 “>The target effect

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Glowing Walmart rival target – Yahoo Finance’s 2019 Company of the Year – get a small speed bump during the holiday season. In the midst of a shorter Christmas shopping season and fluctuating consumer confidence (thanks to the China trade war), Target’s sales fell significantly short of Wall Street estimates. “Data-reactid =” 23 “> The brand-new Walmart rival Target – Yahoo Finance’s company of the year 2019 – There was a slight speed increase during the Christmas season due to a shorter Christmas business season and fluctuating consumer confidence (thanks to the China trade war) Target’s Wall Street estimates.

Wall Street is concerned that Walmart – who had no comparable sales and earnings momentum to Target last year – also saw its Christmas sales very scarce. This, in turn, could put pressure on the stock, especially if Walmart somehow bakes this disappointment into its first crack in the 2020 forecast.

Morgan Stanley analyst Simeon Gutman has just lowered its sales estimate for Walmart businesses in the US from 2.5% to 2% in the fourth quarter. This would be far slower than the US sales growth rate in the US since the beginning of the year (up to the third quarter) of 3.1%.

“WMT shouldn’t have been immune to the headwinds that led to disappointing vacation results at TGT and other retailers (weakness in key vacation categories and shorter sales time). In addition, the SNAP timing headwind was temporary, but may be progressively worse than expected, ”said Gutman.

Paul Trussell, analyst at Deutsche Bank (who also lowered his fourth quarter sales estimate for the US), points out: “Investor sentiment has turned neutral to negative over the past few weeks given the failure of TGT at Holiday SSS (Walmart US & TGT SSS showed a 96% correlation to eight quarters in the last quarter), continued the AMZN overhang with one-day shipping, and what is seen as a lack of ability to continue the Beat & Raise story, which is likely to put an upper bound on the rating would. “

<h3 class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Online money pit“data-reactid =” 28 “>Online money pit

Wall Street has high expectations for Walmart’s e-commerce business for 2020. But not only in sales, but also in the bottom line after years of analysts giving Walmart the benefit of the doubt. Experts say this is the year when Walmart’s online business flips the payline from low losses to greatly reduced losses. Since Walmart has withdrawn certain online clothing brands it bought (ModCloth) and restructured its web business – not to mention expanding its services and digital choices – the retailer has got to the point of analyst expectations.

The problem is that the e-commerce business may not be ready to make a profit. And that might surprise many on the street.

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Gutman estimates that Walmart’s US e-commerce business will lose around $ 2.1 billion this year on an operating profit. That would be a loss of $ 1.9 billion in 2019.

Gutman says: “We were previously convinced that E-Comm losses would peak in F’20. We now assume that the losses in F’21 will increase primarily because the E-Comm margins continue to be negative alongside a growing sales base. “

DISTRIBUTED PICTURE FOR WALMART - Doug McMillon, Walmart President and CEO, announced today that Walmart will prioritize military spouses, making it the largest US company to make such a commitment. This announcement was made during a Veterans Day ceremony on Monday, November 12, 2018 in Bentonville, Ark. (Gareth Patterson / AP Images for Walmart)

Doug McMillon, President and CEO of Walmart. (Gareth Patterson / AP Images for Walmart)

<p class = "Canvas-Atom Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "None of that to take Walmart's solid year or so Operating performance – in many ways this is a completely different company under the constant hand of CEO Doug McMillon (for good). Walmart has achieved six quarters of the growth in operating profit in its key US business and gained market share by expanding services such as online buying and in-store pickup. The company’s grocery has also improved significantly in terms of choice, service, and quality, and inventory in US stores is being handled better. “Data-reactid =” 48 “> None of this can affect Walmart’s solid year of operation. Performance – In many ways, this is a completely different company under the firm direction of CEO Doug McMillon (for the better). Walmart has six quarters in its key US business growth in operating income and market share growth through online services and buying, and in-store pick-up, the company’s grocery has also improved significantly in terms of choice, service and quality, and inventory management in US stores has been improved.

Aside from the concerns listed above, the billions of dollars that Amazon spends on one-day shipping are beginning to gain ground in the industry, and a number of recent management changes at Walmart are red flags that are worth monitoring. In addition, Walmart gets a large amount of inventory (the old rule of thumb is almost 70%) from coronavirus-affected China. It is unclear how this situation will affect Walmart’s inventory this spring, and hence the financial outlook.

So this is not a normal investor day for Walmart. Indeed, the whole day could end with the stock closing with a thud.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It should be noted that Walmart told Yahoo Finance about this The investors' day is closed to the media Live streaming on Walmart’s Investor Relations page, The company has refused to provide someone from the management team for interviews from the event, citing “tight” planning. “Data-reactid =” 51 “> It should be noted that Walmart has informed Yahoo Finance that its investor day is closed for, The Company has refused to rely on someone from the executive team for interviews from the event on “tight” planning.

So here is the Wall Street community, hopefully making their post-insider access stock calls right. As for the average live stream investor, they may be wondering whether Walmart stock is a good buy due to weakness worth continuing after a solid 2019 operating performance, or one that should be avoided altogether ,

Until then, you can buy groceries on weekends.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Brian Sozzi is an editor and co-moderator of The first trade at Yahoo Finance. Watch the first trade every day Here at 9:00 p.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @ BrianSozzi and further LinkedIn,“data-reactid =” 54 “>Brian Sozzi is an editor and co-moderator of The first trade at Yahoo Finance. Watch the first trade every day Here at 9:00 p.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @ BrianSozzi and further LinkedIn,

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Read the latest financial and business news from Yahoo Finance“data-reactid =” 55 “>Read the latest financial and business news from Yahoo Finance

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Follow Yahoo Finance on Twitter. Facebook. Instagram. Flipboard. Smart News. LinkedIn. Youtube, and reddit,“data-reactid =” 63 “>Follow Yahoo Finance on Twitter. Facebook. Instagram. Flipboard. Smart News. LinkedIn. Youtube, and reddit,

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