Jack, I must disagree with your statement about Walmart's international expansion doing "great". It's not. Walmart has been trying to MAKE money internationally for 10 years, and to date they have lost money, ex the recent Q, with a paltry 6 million.
Yes, Walmart is strong in Canada with about 25% market share. Can they grow this? In Mexico, the Walmart brand has flopped, and they now have shifted to the Cifra relationship. South American revenues are on the increase, but are at such small levels, it is not affecting the top or bottom lines very much.
Walmart, to continue to grow at 15%, which by the way, they are struggling to do this, must penetrate Europe and Asia. And to date, the cost of entry into these markets have proven to be miscalculated by Walmart, as its much higher than they have forecasted or expected. The competition is vast, and entrenched--Carrefour, Continent, GB, Maxi, Metro, Fegro, Boots, Argus, Otto, Singer, Vroom and Dressman, Dixons, Big, Sarma, Aldi, Inter Discount, Macro, Neckerman, Hertie, to name just a few! These are all multi hundred store chains (some in the thousands) and are traditional and respected brands in their respective countries. Walmart will have trouble growing internationally.
Walmart has a 7% retail market share in the U.S. How much more can they reasonably get?
Walmart is still a good company, and will continue to grow MODESTLY and profitably, but today's valuations just are not supported by good future fundamental prospects.
On the technical side, my indicators trigger a strong sell, and I expect WMT to shed 10-15% of its value in July.
Nothing fundamental has really changed for WMT since Jan., yet their stock is up 50%. Why? Because of the buy back of stock. This temporary boost in over valuation will end and end abruptly. Also, retail stocks are the first to plummet when any bad news hit. So I view a short on WMT, as both an income producing opportunity, and a hedge on the bull bubble. Good Trading. LF |
