4 reasons why Walmart’s sell-off is an opportunity for investors willing to be a little patient


Cars drive past a Walmart store in Washington, DC, on August 18, 2020.

Nicholas Kamm | AFP | Getty Images

On Wall Street, many investors voted with their feet Thursday: They sold off Walmart shares as the company missed fourth-quarter earnings estimates, gave a disappointing outlook and warned some stay-at-home pandemic trends may be fading.

Since the news broke, more than $25 billion in market cap has vanished. Shares closed Friday at $138.34, valuing Walmart at $391.4 billion. The stock is up more than 17% over the past year, but it’s well off its 52-week high of $153.66, which it set on Dec. 1.

One of the biggest issues is the $14 billion Walmart wants to invest in its business as it ramps up automation, improves its supply chain and adds new customer services. Walmart CEO Doug McMillon tried to persuade investors that it’s the right decision at the right time. He said he wants to tap new opportunities that will lift the retailer’s bread-and-butter business of selling groceries and other merchandise.

Simeon Gutman, a Morgan Stanley retail analyst, said the company’s investments will weigh it down for the short term, but set it up for the future as it fends off traditional players and threats like Amazon. The firm rates Walmart as overweight. It lowered its price target by $2 to $154, but that represents a nearly 10% gain from where shares are currently trading.

“The underlying message is ‘We just had a very successful 2020,'” he said. “Rather than let some of that harvest, we’re going to plow it back in and drill down and make our competitive advantage even stronger.”

Here are four reasons why the company’s strategy could be an opportunity for long-term investors:

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