This is the final article (Part III) of our three part series: “Is Walmart Stock a Good Buy, Sell or Hold”. Check out Part I, which presents Walmart’s valuation and fundamental analysis.

  1. Negative / Favorable Catalysts Impacting Walmart (WMT)

Overall macro economic factors in the U.S. may yet be the biggest catalyst causing a decline in the profit growth for Walmart (WMT). As stated by Wal-Mart’s management on the firm’s Q1 report, “WMT’s first quarter sales fell by 1.4% due to payroll tax increases, delays in tax refund checks, challenging weather conditions and less food inflation than expected”.

Wal-Mart’s management is forecasting a Q2 same-store growth in the range of 0% – 2% for WMT and 1% – 3% for Sam's Club. Since the second quarter period is normally defined by warm summer weather, this could be a catalyst for improving sales of summer outdoor items, including gardening and patio accessories, and light clothing and apparel.

Walmart’s gigantic cost advantage could yet prove to be a positive catalyst for continued improvement in operating efficiencies over some of its smaller competitors, although peers like Costco (COST), which operate at a much lower cost structure, could give WMT a run for its money.

Consumers across the globe are looking for cheaper alternatives to everyday commodities. And while WMT, with its vast supply and distribution chain, is well placed to compete on its "everyday low prices" mantra, competitors like Dollar Stores and Dollar Tree appear to be drawing some consumers away from Walmart and its higher-cost peers, forcing them to compete on price alone.

Price cuts are a negative catalyst that could impact WMT's revenue and earnings potential. A strategic longer-term positive catalyst for Walmart and its stock could be the decision to reallocate capital away from some of its lower-return “new international stores” into smaller higher-return stores based in the U.S. This reallocation of capital will allow WMT to earn better operating margins over the coming quarters. 

  1. Bottom Line Conclusion

Based on our analysis, as presented in this three part series, MarketConsensus rates Wal-Mart stock as a MODERATE BUY. This recommendation could change into a STRONG BUY depending on continued improvement in the economy, a strong turn around in same-store sales, and other things remaining stable.