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In this article, we evaluated two major retail stocks: Walmart (New York Stock Exchange:WMT) and target (New York Stock Exchange:TGT), use TipRanks’ comparison tool to see which one is better. A closer look suggests a neutral view on Walmart and a bullish view on Target.
Walmart owns both retail stores under the Walmart brand and wholesale stores under the Sam’s Club name. We offer a wide variety of items at everyday low prices in-store and online. Target is a competitor, offering a similar selection of items in his brick-and-mortar Target stores and online.
Walmart’s stock is up 16.6% since the beginning of the year and 35% since last year, while Target’s stock is up 18% since the beginning of the year, but only 8.8% from last year.
With Walmart’s stock price significantly outperforming Target over the past year, it’s no wonder Walmart’s valuation is trading at a much higher valuation. Since both retailers are profitable, we use the price-to-earnings ratio (P/E) to evaluate their valuations against each other and the industry’s valuation.
For comparison, the retail large-cap sector has a P/E of 34.3x, which is in line with its three-year average.
Walmart (NYSE:WMT)
Walmart’s P/E ratio of 31.7x is slightly lower than the current valuation of all major retailers, but in line with the average P/E ratio over the past five years. In fact, with the share price soaring to record highs, it’s no surprise that insiders are dumping their shares. Therefore, until a more attractive valuation occurs, a neutral view may be appropriate.
First, the fact that Walmart is trading in line with its average P/E over the past five years suggests that further upside may be limited in the short term. In fact, over the past three months, the insider has dumped $6.3 billion worth of Walmart stock in informative sell trades.
Additionally, all vending transactions that occur within that time period are not counted. Auto-sell parameters are established in an insider’s preset trading plan and may include prices at which shares are automatically sold.
With Walmart stock soaring to record highs on strong sales, it’s no surprise that insiders are touting its strength. The retail giant’s overall sales increased 5.7% year over year last quarter. This included global online sales up 23%, international net sales up 17.6% and global advertising sales up 33%.
Finally, Walmart pays a dividend yield of 1.25% with a payout ratio of 34.16% of net income. There’s nothing remarkable about this, but if the share price declines, it could be worth holding on to, especially considering the long-term gains.
Walmart stock has increased 43% in the past three years, 100% in the past five years, and 200% in the past 10 years. Therefore, investors may want to better monitor the entry price.
What is the target price for WMT stock?
Walmart receives a “Strong Buy” consensus rating, based on 24 Buy, 3 Hold, and 0 Sell ratings assigned over the past three months. Walmart’s average price target is $65.58, suggesting 7% upside potential.
Target (NYSE:TGT)
At a P/E of 18.6, Target is trading at a significant discount relative to its industry and Walmart, and is slightly lower than its five-year average P/E of 19.6. Target is well below its all-time high of around $260, set in August 2021, and is showing signs of a recovery in growth, so a bullish view seems appropriate, especially considering long-term stock price growth.
Unlike Walmart, Target’s insiders largely own the company’s stock, with information sales totaling just $4.6 million in the past three months. But the trend is notable considering its $3.6 million sale on the private market about a week ago.
Despite this, several analysts have raised their price targets on the stock in the past week or so following the latest earnings report. The major retailer had a tough year in 2023, with same-store sales growth slowing, including a 4.4% decline during the holiday season.
However, management said in the earnings call that Target’s decline in foot traffic improved in the fourth quarter. Meanwhile, overall sales rose 1.7% year over year to $31.9 billion, slightly beating the consensus estimate of $31.89 billion.
Additionally, target GAAP (generally accepted accounting principles) adjusted earnings per share increased 57.6% year-over-year to $2.98, compared to guidance of $1.90 to $2.60 per share and consensus of $2.43 per share. significantly exceeded. For the first quarter, Target expects fiscal 2024 comparable sales to be flat to 2% higher, suggesting a turnaround is on the horizon.
Target stock has been flat for the past three years, but has risen 145% over the past five years and 274% over the past 10 years. So it looks like an attractive buy-and-hold position in the long term. Finally, Target has a payout ratio of 49.05% of its net income and he pays a dividend of 2.58%, which is also worth buying and holding for the long term.
What is the target price for TGT stock?
Target has a Moderate Buy consensus rating, based on 19 Buy, 10 Hold, and 0 Sell ratings assigned over the past three months. Target’s average price target is $177.11, implying 6.3% upside potential.
Conclusion: Neutral on WMT, bullish on TGT
Walmart and Target have long been seen as two sides of the same coin, but their sales and stock performance over the past 12 months have been vastly different. Walmart stock is currently at an all-time high, and upside potential may be limited as insiders are selling stock.
However, given that the turnaround is likely to take off in 2024, Target appears to have some room for business. So while both large retailers are likely worth buying and holding over the long term, especially to recoup their dividends, Target looks like the clear winner, with an even bigger chance of winning in the short term. There is a possibility of an increase.
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