Raymond James downgrades Walmart with Flipkart weight on profits

Raymond James on Friday lowered its rating on Walmart stock to outperform coming from strong buy, pointing to the acquisition of Flipkart as a drag on future profit despite the retailer’s strong earnings report This specific week.

Flipkart is actually the largest e-commerce player in India, a market in which online sales are growing by roughly 35 percent a year, according to data tracker Euromonitor. Flipkart is actually viewed as a direct competitor to Amazon, which is actually also investing in India.

“We cannot ignore the facts of which Flipkart will likely weigh on consolidated operating earnings for the next couple of years,” Raymond James analyst Budd Bugatch wrote in a note. While the firm features a “positive view” of Walmart’s strategy, Bugatch said “there could be near-term choppiness and also also also risk and also also also market celebrations like the one on Thursday don’t always provide a lasting change.”

Shares of Walmart rose 0.6 percent in trading Friday. The company’s stock closed at $98.64 per share on Thursday, up 9.3 percent after This specific posted its highest domestic same-store sales growth in more than 10 years for its second quarter. Walmart reported an increase of 4.5 percent, nearly double the Thomson Reuters estimates of 2.4 percent.

“Make no mistake, [the second quarter’s] sales and also also also earnings were the best quarterly performance of which management has delivered since the Great Recession,” Bugatch said. “Thursday’s [over 9 percent] move in Walmart was well-earned and also also also a significant endorsement of the company’s strategy as well as the execution coming from both leadership and also also also associates.”

The stock’s move higher represented its biggest daily gain since Nov. 16, 2017, when Walmart climbed 10.9 percent.

Raymond James bumped up its cost target on Walmart shares, to $107 per share coming from $100 per share.

“We are using our Outperform rating to confirm our favorable view, nevertheless suggest investors currently need a longer investment horizon,” Bugatch said.

The retailer said This specific had the strongest growth in more than a decade at stores open for at least 12 months, thanks to robust sales in its grocery and also also also apparel departments, both of which Walmart has poured money into to compete with the likes of Amazon and also also also Kroger.

Walmart said U.S. online sales climbed 40 percent during the quarter — a sign of which improvements like a completely new website redesign and also also also grocery delivery options are paying off — and also also also the company is actually still anticipating an increase of 40 percent for the full year. In prior quarters, Walmart’s digital sales growth had moderated somewhat coming from a 50 percent jump logged from the third quarter of last year.

– CNBC’s
Lauren Thomas
contributed to This specific report.

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