The Bullish and Bearish Case for Walmart in 2014

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How will Wal-Mart Stores Inc. (NYSE: WMT) shares do in 2014? It is undisputable that 2013 was a considerable year for stocks, with the S&P 500 Index rising by more than 29% and the Dow Jones Industrial Average rising by 26.5%. Both major index readings were their highest closing bell prices ever. The question now is what to expect in 2014. 24/7 Wall St. has generated a bullish and bearish scenario for Walmart and for each stock of the Dow for 2014.

There are many macroeconomic factors to consider that also affect Walmart. Most Wall Street strategists are forecasting higher price targets for the Dow and S&P 500. This rising tide should lift most ships, which would seemingly help Walmart. The Federal Reserve is about to get a new chairman, and the current investment outlook from most strategists seems to be one in which interest rates will rise gradually in 2014.

The world markets are exiting their recessions at the same time that U.S. gross domestic product is expected to tick up, all of which may help Walmart. The world’s largest retailer saw its shares gain some 18% in 2013. That is short of the market’s gains, but the weakness of more than a 2% drop in December kept those gains muted for the retail giant.

Walmart’s current dividend yield for 2014 is 2.4%. After it closed out the year at $78.69, its consensus analyst price target is $83.77, and the 52-week trading range is $67.72 to $81.37.

The bullish case is one of a continued stock breakout. Rival Target Corp. (NYSE: TGT) may have seriously aided other retailers after its credit card breach around the holidays. Walmart is also buying back large amounts of stock. The company is even considered a real staple now as well, because so much of America almost has no choice but to shop at Walmart for its low prices. There is also the longstanding argument that Walmart could unlock value by sending Sam’s Club to holders. We see that as a low-probability event, but Walmart has much room for growth internationally as well. Walmart likely will continue boosting its dividend in the years ahead.

The bearish case against Walmart is one in which it has perpetual labor issues. Public sentiment is against the company as well, even if the public keeps flocking to the super-centers for its low prices. Despite international growth opportunities, Walmart likely will find itself in the same boat as other U.S. companies in that it merely cannot bring that international capital in without being penalized. Another threat is that Walmart is being slowly pick-pocketed by the rise of the dollar store theme, as customers are continuing to head in that direction of the sub-$10 and sub-$5 markets. The international probes, such as in Mexico, also remain an ongoing risk.

Walmart offers a bit of everything to investors. Its stock chart is one that is no longer just stuck in a multiyear range. The retailer also trades at only about 14 times expected forward earnings for calendar year 2014. The company is on its way to $500 billion in annual sales. While the consensus price target of almost $84 and the 2.5% dividend may imply upside of almost 10% for 2014, the median analyst price target (rather than the mean target) is up at $84.50, and one analyst even has a $90 price target.

Walmart’s stock seems to have more going for it than factors working against it. At least that is how its stock has acted any time that bad news has come up.