Walmart is set to undergo a significant change as it announces a 3-for-1 stock split scheduled for February 26, 2024. This decision, attributed to CEO Doug McMillon, aims to align with the vision of the company’s founder, Sam Walton, who believed in making Walmart’s shares more accessible to its associates. The move comes amidst Walmart’s continuous growth trajectory and future plans.
The historical precedent of Walmart stock splits suggests a mixed bag of outcomes. While some splits in the past have resulted in immediate upticks in share prices, others did not follow the anticipated pattern. For instance, earlier splits in 1975, 1980, and 1990 didn’t exhibit significant movement in share prices surrounding the event. Conversely, splits in 1982, 1987, and 1993 saw more pronounced reactions, with shares either rallying post-split or exhibiting mixed movements.
Despite the uncertainty surrounding the impact of stock splits on its share prices, analysts caution against solely banking on this event for investment decisions. Instead, they advocate for a focus on the company’s underlying fundamentals, growth prospects, and valuation.
Walmart’s robust underlying business remains a highlight, with fiscal 2024 revenue projections hovering around $645 billion. The company continues to demonstrate strength in generating profits and free cash flow. While its growth prospects may not be as explosive as in its earlier years, its e-commerce and advertising segments emerge as pivotal drivers for future expansion.
However, concerns loom over Walmart’s current valuation, with its forward price-to-earnings multiple standing at 23.8x. While not exorbitant, this valuation does not necessarily present a bargain for investors. Consequently, experts suggest exercising caution and waiting for potential pullbacks before considering entry into the stock.
In light of these considerations, Walmart’s upcoming stock split represents a notable development in the company’s journey. Yet, its true impact on share prices remains uncertain, underscoring the importance of a comprehensive evaluation of its fundamentals and market positioning for investors navigating this change.
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