Walmart Inc.'s stock price topped its previous 52-week high Thursday, peaking at $117.96 per share on the New York Stock Exchange. Although the price jump coincided with the retailer's announcement Tuesday of a new policy on gun and ammunition sales, analysts said a completely different set of factors is behind it.
The stock's previous record high of $115.49 was set July 16, 2018.
Consumer spending remains strong and retail businesses have been doing better in recent weeks, said Brian Yarbrough, a retail analyst with Edward Jones. Lower-income consumers, in particular, are faring better than they have in a long time, he said, with minimum-wage increases putting more cash in their pockets.
But the Bentonville-based retailer's stock got a further boost Thursday morning when Morgan Stanley analysts said in a note that PhonePe, the payments processor that Walmart acquired through Flipkart to serve customers in India, may be worth between $7 billion and $12 billion.
The analysts said PhonePe could be an "Indian Super App" for Walmart, potentially adding $20 billion in revenue.
Morgan Stanley's Simeon Gutman added that Walmart's U.S. division -- its largest -- will be among the few retailers to see earnings growth this year.
In the note, Gutman raised the target price of Walmart shares from $115 to $125, and in a bullish scenario, from $150 to $165. A broader group of analysts surveyed by Thomson Reuters pegs the one-year target price at $118.67.
Walmart shares ended the day at $115.44, down 47 cents, or 0.41%. Shares have traded as low as $85.78 over the past year.
With investors focused on all the positives, Yarbrough said, it's doubtful that Tuesday's announcement that Walmart will phase out sales of ammunition for handguns or assault-type firearms had any effect on its stock price.
In the letter notifying employees of the changes, Walmart President and Chief Executive Officer Doug McMillon said the company currently has about a 20% market share of ammunition sales in the U.S. He said he expects that to eventually drop to between 6% and 9%.
According to Zacks Investment Research, ammunition sales in the U.S. run about $2 billion each year. That puts Walmart's 20% share at about $400 million -- a small fraction of its fiscal 2019 revenue of $514.4 billion.
As Yarbrough pointed out, the new policy isn't likely to have much effect on the retailer's earnings or sales. Ammunition sales are "a smaller part of their business," he said, "and I don't think it's a very big traffic driver."
Business on 09/06/2019