reference 1 - Wal-Mart

Topics: Wal-Mart, Department store, Discount store Pages: 20 (6168 words) Published: April 21, 2014
Student Investment Management
Analyst Report
Initiating Coverage

Wal-Mart Stores Inc.

Wal-Mart operates over 10,000 discount department stores, supermarkets, hypermarkets and wholesale centers under 69 different banners. The company has a presence in 27 countries across the globe.

Overview of Recommendation
Investment Thesis

Opportunities
 Track record of excellent management and
continued cost cutting to improve margins.
 History of returning wealth to investors
through aggressive buybacks and dividends.
 EDLP strategy and aggressive pricing attracts
customers regardless of economic condition.
 High growth potential in emerging markets,
including significant China presence.
Risks to Recommendation
 Continued uncertainty regarding tax policy.
 Slowing economic growth in China.
 Erosion of market share due to success of
certain competitors (Amazon, Target).
 Unfavorable exchange rates.

I am initiating coverage with a rating of “BUY” and a 12month price target of $86.00. This target represents potential capital gain of 14.01%, and potential return of
16.51% including dividend income. Wal-Mart is well
positioned in its industry, with significant market share
among hypermarkets and supercenters. Continued cost
cutting efforts have led to increases in margins and
improving global economic conditions should lead to
international sales growth. Uncertainty over tax policy in
the U.S. could lead to cautious consumer spending nearterm, but this should be countered by low priced “staples” offerings, the company’s EDLP (Every Day Low Price) marketing strategy, and growth in foreign markets.

April 9, 2013

Student Investment Management: Initiating Coverage

Wal-Mart Stores Inc.

Contents
Company Overview ....................................................................................................................................... 3 Wal-Mart Stores Inc. Analysis ....................................................................................................................... 4 Segment Overview and Analysis ................................................................................................................... 5 Walmart U.S. ............................................................................................................................................. 5 Wal-Mart International ............................................................................................................................. 7 Sam’s Club ................................................................................................................................................. 9 Competition and Sustained Competitive Advantage .................................................................................. 11 Competitors ............................................................................................................................................ 11 Competitive Advantage .......................................................................................................................... 12 Recent News ............................................................................................................................................... 12 Macroeconomic Outlook ............................................................................................................................ 13 Financial Projections ................................................................................................................................... 14 Key Income Statement Assumptions ...................................................................................................... 15 Analyst vs. Consensus ............................................................................................................................. 16 Valuation...


Cited:  Wells Fargo Equity Research Report. Nemer, Dill, Wendt, Asif. February 21, 2013.
 J.P. Morgan Equity Research Report. Horvers, Stubins, Becks, Elder. February 15, 2013.
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