Walmart (WMT) reported third-quarter earnings this morning that beat Wall Street’s consensus on both the top and bottom line, but sparked concern over the overall state of the economy. The stock is down 7% so far in Thursday’s trading session.

The company reported a 5.2% climb in revenue year over year, posting $160.8 billion and outperforming the consensus of $159.6 billion. Adjusted earnings of $1.53 were a modest 2% bump YoY and narrowly beat the consensus of $1.52.

Walmart also lifted its full-year earnings guidance to $6.40 to $6.48, and expects net sales to climb as much as 5.5%. But, it was the concern over more cautious consumer spending that made headlines, sending shares lower this morning.

As one of the world’s biggest retailers, Walmart has its finger on the pulse of the US economy – especially as a budget-friendly alternative to retailers like Target. So when Walmart sees slowing consumer spending, there is obviously cause for concern.

That being said, we discussed Target’s dwindling sales amidst a challenging economic backdrop yesterday. The company reported a similar sentiment that Walmart did, and yet, TGT climbed 17%.

So, why is WMT falling on this news? In theory, cautious consumer spending would play right into their hands as consumers choose more budget-friendly products in favor of their premium alternatives. 

CEO Doug McMilon spoke to this, mentioning that the company is focused on helping families get through the holiday season during this tumultuous time. He referenced lower costs on Thanksgiving meals and better prices on gifts as Christmas shopping is already well underway.

Whether you’re currently invested in WMT or are considering buying this stock as it now sits at a discount, we’ve taken a look through the VectorVest stock forecasting software to help you tune out the noise and focus on what matters most. We found 3 things you need to see…

Despite Poor Upside Potential, WMT Has Good Safety and Fair Timing

VectorVest simplifies your trading strategy by eliminating human error, guesswork, and emotion. You gain all the insights you need to make calculated decisions through the proprietary stock rating system - it tells you what to buy, when to buy it, and when to sell it.

This system is made up of 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation. 

You’re even given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time - including WMT. Here’s what we found:

  • Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. It’s a far superior indicator than a simple comparison of price to value alone. The RV rating of 0.84 is poor for WMT, though, and is coupled with the fact that the stock is overvalued. Current value is just $97.
  • Good Safety: The RS rating is a risk indicator. It’s computed through a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, price volatility, sales volume, and other factors. WMT has a good RS rating of 1.15 right now.
  • Fair Timing: WMT may have fallen 7% today, but it had gained nearly 6% leading into this news over the past week. As such, the stock’s timing is just fair right now with an RT rating of 0.89 - which is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 0.97 is just below the average, but deemed fair nonetheless. VectorVest has placed a HOLD recommendation on this stock, and we encourage you to wait for a more meaningful price trend to form before you buy or sell this stock. Learn more with a free stock analysis today for WMT or any other stock in your portfolio!

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VectorVest advocates buying safe, undervalued stocks, rising in price. WMT fell 7% in Thursday’s trading session after beating the top and bottom line, but issuing a warning about cautious consumer spending. The stock has poor upside potential, good safety, and fair timing.

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