Goldman Sachs Downgrades Shares of Wal-Mart to Neutral (WMT)
January 10, 2011 10:27 AM
Goldman Sachs is out with a research report this morning, where it downgrades shares of Wal-Mart (NYSE: WMT) to Neutral, from Buy; it has a $60.00 price target on the stock.
The GS analysts cited several reasons for the downgrade, including:
1. WMT's size limits SSS upside versus the market
2. Budding inflation in food and apparel and the lapping of SG&A reductions limits margin upside
3. Additionally, the shares trade at a 12% discount to the S&P 500, below its five-year average premium of 4%.
The analysts believe these discounts are warranted, given the company should see less of a rebound versus other companies in our coverage due to the fundamental concerns discussed above.
As for valuation, the analysts remarked, “Since adding WMT to the Buy List on 1/28/09, the stock is +11.0% vs. the S&P +45.5%; and +0.9% vs. S&P +11.4% over past 12 months. We are raising our 12-month price target as we roll forward our estimates to forward 24 months EPS from 2011 EPS within our P/E framework.”
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