Investment Outlook for Walmart

Analysts at Telsey Advisory Group (TAG) have identified Walmart (NYSE:WMT) as their top stock pick for the upcoming holiday season, anticipating solid fiscal Q3 2024 earnings on Nov. 19.

Key Forecast Drivers

The strong quarterly performance is expected to stem from:
– Increased Market Share: Growth in the grocery sector.
– Non-Discretionary Item Improvements: Better sales in essential products.
– Strategic Initiatives: Positive impacts from store renovations and digital expansion.

Analyst Insights

Joseph Feldman, leading the TAG analysts, noted, “We also expect a continued solid contribution from the company’s higher engagement with upper-income households.” However, they cautioned that this growth may be tempered by disinflation in certain categories and ongoing challenges in consumer spending.

Profitability and Market Considerations

Walmart is also positioned to benefit from lowered supply chain costs and profitable ventures like advertising and third-party fulfillment services. But, these advantages might be partially offset by increased promotional costs and necessary investments in technology and labor.

Outlook for Holiday Season 2024

Looking ahead, analysts predict sustained consumer resilience and a gradual shift towards discretionary spending. Walmart's strategies to adapt include:
– Competitive Pricing: Keeping prices attractive for consumers.
– Expanded Online Assortments: Increasing the variety of products available online.
– Faster Fulfillment Options: Enhancing delivery speeds to meet consumer demand.

Trend Predictions

TAG anticipates that improvements in discretionary goods will support profit margins and assist in managing expenses more effectively, particularly in Q4 of fiscal 2024. With strong business momentum, TAG projects operating income will grow faster than sales into 2025.

Additionally, TAG expects Walmart to revise its fiscal year 2024 earnings per share (EPS) guidance toward the higher end of the $2.35 to $2.43 range.

The firm maintains an Outperform rating on Walmart stock, setting a price target of $92.