Walmart's $1 Trillion Target Slips Away Amidst Slow Growth
Walmart's market capitalization has drifted below $1 trillion after reaching that milestone earlier this year. The company is currently valued at over $850 billion, but investors are being cautious about its ability to reclaim a $1 trillion valuation anytime soon.
The main reason for this caution is Walmart's slow growth rate. Despite operating as the largest global retailer, the company has achieved only a 4% compound annual growth rate (CAGR) in revenue over the past decade. In its most recent fiscal quarter, Walmart reported a 5.9% year-over-year growth rate, but earnings per share dipped by 9.1%
Walmart operates on low profit margins, which is common for retailers. However, Amazon's ability to achieve higher margins due to its cloud platform makes it harder for Walmart to justify its premium valuation of a 39 P/E ratio.
The company's guidance for the next quarter only implies up to 3.75% year-over-year revenue growth, and this was before the Fed announced an interest rate hike. This rate hike, along with another promised by the end of the year, can further slow Walmart's growth.