Bluechip stock, Walmart (WMT), has fallen 12.5% the past two days due to lackluster e-commerce growth from this past holiday season. The obvious reason for this is one simple word…Amazon. There’s no doubt that Walmart is an afterthought to Amazon and will continue to be in online retail, but anybody living above a rock could tell you that. Walmart isn’t attempting to beat Amazon at their own game, but rather this dip has struck many as a buy for Walmart. Is this seemingly obvious buy a good idea?
Well first of all, in a time where stocks are overvalued on the whole, to say one of the Dow 30 is at a discount is sort of a contradicting statement. However, as overly optimistic investors along with newcomers with FOMO look for any stock at a discount, Walmart may have appeared at just the right time. As previously stated, Walmart has dropped 12.5% in the past two days falling to 91.52. Ironically enough an article published just last week by CNBC stated that historically Walmart along with P&G have been the safest two of the Dow 30 when the market gets wild. This information makes Walmart seem even more attractive as a buy, but let’s not get too optimistic. Many articles have called this a great time to buy WMT, but is 91 a share really that undervalued of a price? Of course Walmart will be a major player until the day aliens rain down from above, but it still is fairly valued at 91. In fact, I would argue that the current intrinsic value of WMT is around 90. So if it’s currently priced at an accurate, fair valuation, why would you buy? Well because stocks will just keep going up…right? Sure they might for the next week, six months, year, three years or however long but surely WMT was overvalued last week at 108 and will be when it returns there next month.
So don’t be fooled into thinking WMT looks cheap just because it is right now compared to everything else. It’s only a matter of time before WMT falls substantially along with the rest of the Dow. THEN, Walmart would be a bargain. So don’t be impatient and put money in something that is fairly priced just because everything else is overpriced when you can wait for stocks to be undervalued in the near future.