Wal-Mart Stores Inc., more famous as
just Wal-Mart is a company that operates in the retail industry, with various
formats for its endeavors across the globe. In the US it dominates the market
with almost 90%, offering a very large variety of outlets – discount stores,
supercenters, neighbor markets and other smaller location buildings. On the
international scale the company has strongest reach in Canada, Brazil, Costa
Rica, Salvador, Honduras, China, Argentina, Mexico, Japan and the UK. The main
corporate governance is in Bentonville, Arkansas and the company is estimated
to employ around 2.2 million people in 2013.
The revenues for Wal-Mart in the
fiscal year that ended in January, 2013 are reported to be $469 162
million, which is a 5% increase in comparison to 2012. The operating profit was
$27 801 million, which is a relatively similar increase of 4.7% from 2012.
Net profits accounted for nearly $17 000 million in 2013, which on the
other hand is an 8.3% since 2012. As you can see smart cost-cutting and
reallocations in operations and taxes have saved a lot of resources for the
company, which has a lot of influence in the US, where it makes more than half
of all its revenue.
The Image of the US giant is somewhat
controversial. One the one hand it is an absolute market leader with almost
unprecedented scale and very wide retail variety in products. Its economies of
scale allow the company to offer the lowest costs, which also earns it constant
market growth. This increasing influence has given the company a wide
international reach, which gives the stores a huge advantage in local areas
with neighborhood markets becoming uncompetitive. On the other hand it has a
bad reputation with labor relationships and violation of corruption laws, which
has brought a lot of bad press and fluctuating stock performance. However, the
sheer scale of the company has ensured its leading position on the US market,
especially with the influence it has on major suppliers.
Currently Wal-Mart stock is
trading for $77 per share. 52 weeks ago it was around $76 and in the period it
fluctuated a lot, with the lowest price being $71.81 in October, 2013 and the
highest $81 in December. Such variance is typical for the retail sector, as most
of the earnings come during holiday periods. However, this degree of
uncertainty is high even for this industry and investors’ opinions are
controversial.
12-month forecasts for WMT stocks have
an average target of $81 for the next periods, with the highest estimate being
$90 and the lowest $66. The average estimate is a 2.44% increase in comparison
to the current price. As it can be seen expectations are that the performance
of the US retailer will stabilizer over the next year, yet it isn’t enough to boost
confidence. With only 2.44% in potential earnings and such high degrees of
variance, the gains are just not worth the risk. Polled investment analysts
recommend for existing shareholders to hold their stock, as chances are that it
will score at least minor increases over the next quarters, yet potential
investors should wait for the quarter starting after three months, which is
historically the most profitable for the sector. This expectations by itself
creates a self-fulfilling trend, since everyone is set to buy in this period
and the demand surges the price. The only events that can change this
expectation are either bad press releases or sudden improvements in
international operations, opening new markets for the mature company.
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