In the recent discuccion regarding sales tax online I speculated Wal-mart had their .com store as a seperate entitity:
Price: $63 11/16
12 Month Price Objective: $78
Estimates (Jan) 1999A 2000E 2001E
EPS: $0.99 $1.26 $1.44
P/E: 64.3x 50.5x 44.2x
EPS Change (YoY): 27.3% 14.3%
Consensus EPS: $1.26 $1.42
(First Call: 06-Jan-2000)
Q4 EPS (Jan): $0.35 $0.41
Cash Flow/Share: $1.41 $1.74 $2.08
Price/Cash Flow: 45.2x 36.6x 30.6x
Dividend Rate: $0.16 $0.20 $0.22
Dividend Yield: 0.3% 0.3% 0.3%
Opinion & Financial Data
Investment Opinion: A-1-1-7
Mkt. Value / Shares Outstanding (mn): $281,799 / 4,473
Book Value/Share (Oct-1999): $5.43
Price/Book Ratio: 11.7x
ROE 1999E Average: 24.1%
LT Liability % of Capital: 40.2%
Est. 5 Year EPS Growth: 16.0%
Stock Data
52-Week Range: $70 1/4-$38 11/16
Symbol / Exchange: WMT / NYSE
Options: Chicago
Institutional Ownership-Spectrum: 30.9%
Brokers Covering (First Call): 18
ML Industry Weightings & Ratings**
Strategy; Weighting Rel. to Mkt.:
Income: Overweight (07-Mar-1995)
Growth: In Line (07-Mar-1995)
Income & Growth: Overweight (07-Mar-1995)
Capital Appreciation: Underweight (08-Dec-1994)
Market Analysis; Technical Rating: Below Average (29-Nov-1999)
*Intermediate term opinion last changed on 08-Nov-1999.
**The views expressed are those of the macro department and do not
necessarily coincide with those of the Fundamental analyst.
For full investment opinion definitions, see footnotes.
Investment Highlights:
ú By creating a separate ?.com? entity to be
located in Silicon Valley, WMT should be
better able to attract and retain top Internet
talent
ú With new talent and management focus,
Wal*Mart could more rapidly reach its goal of
becoming the ?Wal*Mart of the Web?
ú Wal-mart.com can be grown rapidly with little
financial impact to the parent company due to
its sheer scale. For example:
ú If Wal*Mart owned 50% of the new
venture, it could digest up to $130 million
in losses before having EPS impacted by
more than $0.01
ú For comparison, if Wal*Mart owned
Amazon?s massive $678 million estimated
1999 losses, the EPS impact would be only
$0.15 for WMT vs. $1.14 for AMZN (and
only $0.08 if WMT owned 50%)
ú By establishing a separate entity, Wal*Mart
can unlock the value of the Internet business
ú We believe that the recent trend begun by
KM?s creation of BlueLight.com is likely to
spread through retailing with other possible
movers including JWN, FD, S, JCP, and SKS
ú Our price objective is $78, a 54x multiple of
Bulletin
United States
Retailing-Broadline/General Merchandisers
7 January 2000
Daniel D. Barry
First Vice President
Glenn M. Salzman
Industry Analyst
Wal*Mart Stores
Wal*Mart Takes Major Step Toward
Becoming ?Wal*Mart Of The Web?
BUY*
Long Term
BUY Reason for Report: Analysis Of Wal-Mart.com
Merrill Lynch & Co.
Global Securities Research & Economics Group
Global Fundamental Equity Research Department
RC#10100726
Stock Performance
10
15
20
25
30
35
40
45
50
55
60
65
70
0.012
0.016
0.020
0.024
0.028
0.032
0.036
0.040
0.044
0.048
1997 1998 1999 2000
Wal*Mart Stores
Rel to S&P Composite Index (500) (Right Scale) |
