Walmart (WMT) came through yesterday with a solid Q2 earnings report. But yesterday’s history and an uncertain future looms.
Now that the tax rebate checks have dried up and a global recession is on the horizon, will WMT be the discount safe haven for strapped consumers or will it finally succumb to the consumer slowdown? Two Wall Street firms disagree:
JP Morgan just thinks the risk outweighs the reward:
On one hand, if [same store sales] begin to slow to the 0-2% range, we think the stock falls as EPS upside wanes and the multiple compresses. Conversely, if Wal-Mart is able to deliver a 3-4% [same store growth] in the [second half of the year], some EPS estimate upside exists and with the multiple likely to hold we could see another modest leg up. Net, we’re staying on the sidelines for now.
Meanwhile, Jeffries believes the store will not only be a safe haven for consumers, but investors as well. As the shares of other retailers falter, the firm expects traders to sink their money into more Wal-Mart shares. (Too bad you can’t eat relative performance).
JP Morgan reiterates NEUTRAL on Walmart (WMT).
Jeffries reiterates BUY on Walmart (WMT).
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