Dj Should Walmart Really Be Trading Like A Tech Company? - Heard On The Street

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Should Walmart Really Be Trading Like a Tech Company? — Heard on the Street — WSJ

Dow Jones Newswires

By Jinjoo Lee |Photography by Thomas Simonetti for WSJ

Think tech stocks are expensive? Try Walmart.

America's biggest retailer has become a true investor darling. Its shares have risen about 27% this year, bringing its market value above $900 billion. The stock is now valued at roughly 40 times forward earnings, more expensive on that metric than six of the Magnificent Seven stocks such as Nvidia and Microsoft. Historically, it has traded at a multiple of about 23 times.

When Walmart moves its listing to the tech-heavy Nasdaq on Tuesday, its shares could move up another leg. Analysts at Morgan Stanley estimate that the Nasdaq inclusion could boost demand for Walmart's shares from passive investment vehicles — such as ETFs and index trackers — by $20 billion or more.

Few on Wall Street are betting against the retail giant. Only one Wall Street analyst out of the 42 that FactSet polls gives it a "sell" rating. As of September, Walmart was the least shorted stock in the S&P 500, according to BofA Securities.

Walmart's multiple has risen over the past three years as its supply chain and e-commerce investment paid off in higher profits. After many years of declining or flat earnings, Walmart's net income is set to grow at a double-digit percentage for the third consecutive year. But there could be a bit of froth building up, too. This year alone, its forward earnings multiple has expanded nearly 20%, even as analysts on average reduced earnings expectations for the upcoming fiscal year.

Bulls point to the powerful moat that Walmart has built over the years, especially in e-commerce. With improved online assortment and delivery, Walmart U.S. e-commerce sales have been growing at over 20% year over year in 10 of the past 11 quarters, according to Visible Alpha. Walmart can now deliver within three hours to 95% of U.S. households, up from about 76% two years ago, according to a report from BofA Global Research. This online growth helps Walmart generate high-margin revenue, such as advertising, membership fees and fulfillment services for third-party marketplace sellers.

It helps that competition looks weak: Target is still reeling from past mistakes and grocery giant Kroger failed to scale up after its Albertsons acquisition fell through.

But can Walmart keep delivering tech-like growth? Steven Shemesh, retail analyst at RBC Capital Markets, notes that Walmart is still in the early stages of expanding its high-margin businesses. Its ad revenue last year was roughly 8% of Amazon's. And only about 18 million U.S. households have signed up for Walmart's paid membership, a small fraction compared with Amazon's 107 million Prime members, according to estimates from Evercore.

Walmart's U.S. advertising business has indeed grown at a healthy year-over-year pace of about 30% in recent quarters. That isn't a huge number compared with Amazon, whose advertising business grew at a compound annual growth rate of about 42% since 2017 when its ad revenues were roughly Walmart's size. Shemesh says Walmart is "very measured" in increasing that business to make sure its website and app aren't flooded with ads. But the bigger concern is that Walmart today isn't operating in a white space as Amazon did many years ago. It also lacks exposure to nonretail-related growth areas such as Amazon's cloud business.

Far-out estimates should be taken with a grain of salt, but analysts expect Walmart's earnings to grow at an average annual rate of about 8% over the long term, according to S&P Global Market Intelligence. Among S&P 500 companies with an earnings multiple exceeding 30 times, Walmart ranks near the bottom on long-term earnings growth expectations, according to data from S&P Global Market Intelligence. (This excludes real-estate investment trusts, which distribute much of their taxable income to shareholders.)

If tech-like growth isn't in the cards, Walmart's multiple might be justified if it can achieve reliable, even if not eye-watering, growth in earnings and returns over a long period of time. Costco, for example, commands an earnings multiple higher than Walmart even with modest earnings growth expectations.

But what it lacks in flashiness, Costco makes up for in consistency that Walmart hasn't yet matched. Costco has seen growth in same-store sales every year since 2000 and delivered a return on invested capital exceeding 10% almost every year since 1998. The last time Walmart U.S. saw a same-store sales decline was in 2014, but it also suffered disappointingly slow growth from 2015 to 2017. And returns on investment have been patchier because of its aggressive spending.

Perhaps greater consistency is in the cards for Walmart. In part, this will depend on whether the company is done with its heavy cycle of investment. On Walmart's latest earnings call, an analyst asked if the company's leadership succession — Chief Executive Doug McMillon will be stepping down next month — signals another phase of spending. So far, incoming CEO John Furner, the head of Walmart U.S., has said the company will take a "disciplined" approach. But expanding an already big business could involve even more spending, and it will be difficult for Walmart to avoid hefty spending on artificial intelligence if that's what it takes to keep up with Amazon.

At these high multiples, the market is counting on Walmart to deliver tech-like growth or Costco-like consistency, two things that the company doesn't have a long track record of. Walmart still has a lot to prove.

Write to Jinjoo Lee at jinjoo.lee@wsj.com

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Norsk Hydro shares rise despite mixed Q4 guidance

Investing.com

Investing.com -- Norsk Hydro shares rose 1.5% in Oslo trading after the aluminum producer provided its fourth quarter guidance with mixed results across business segments.

In its Bauxite & Alumina division, Alunorte production is expected to reach nameplate capacity. The realized price for Q4 is projected at $340 per ton, below consensus estimates of $359 per ton. The company also anticipates a negative currency effect of NOK30 million, with stable raw material and fixed costs.

For the Aluminium Metal segment, sales volumes are expected to remain stable quarter-over-quarter. The realized LME aluminum price is guided at $2,632 per ton, with realized premiums between $310-360 per ton. The segment faces higher fixed costs of NOK100-200 million without significant currency effects.

In the Extrusions business, Norsk Hydro forecasts limited year-over-year recovery in sales volumes. While the company expects a positive metal effect of NOK50-150 million from elevated Midwest premiums, this benefit will be fully offset by continued pressure on sales margins.

The Metal Markets division anticipates lower quarter-over-quarter results from recycling and from sourcing and trading activities. The company reiterated its full-year 2025 Commercial EBITDA guidance of NOK200-400 million.

For the Energy segment, production is expected to be seasonally higher alongside higher prices, though price area differences are projected to be lower in Q4 compared to Q3 by NOK330 million.

The company also guided for positive eliminations in Q4 due to the decrease in PAX alumina price.

Despite the share price increase, RBC analysts noted they "expect a negative reaction to today’s announcement with updated guidance implying consensus downgrades to numbers."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Boliden updates 2026 production guidance, delays Odda expansion

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Investing.com -- Swedish mining and smelting company Boliden has provided throughput and grade guidance for its mining assets in 2026, indicating slightly lower production than analysts expected.

Based on the guidance and assuming 2025 year-to-date recovery levels, implied zinc concentrate production would reach 426,000 tonnes, 3% below RBC estimates and 6% below consensus forecasts. Implied copper production would be 118,000 tonnes, 2% below both RBC estimates and consensus.

For the Aitik mine, Boliden expects throughput of 41 million tonnes with copper grades of 0.18%. At Garpenberg, throughput is projected at 3.7 million tonnes with zinc grades of 2.9%.

The Kevitsa mine is expected to process 10 million tonnes with copper grades of 0.24% and nickel grades of 0.17%. For the Boliden area, throughput guidance is 1.8 million tonnes with zinc grades of 3% and gold at 1.6 grams per tonne.

Tara mine is projected to process 1.8 million tonnes with zinc grades of 5.6%, while Somincor is expected to handle 2.2 million tonnes with zinc grades of 6.7%. Zingkruvan’s throughput is forecast at 1.1 million tonnes with zinc grades of 7%.

In its smelting operations, Boliden announced that commissioning of the Odda expansion project has been delayed by two months, with first feed now expected in the first quarter of 2026. At the Rönnskär facility, a final reassessment of recoveries will lead to a SEK400 million adjustment in the third quarter, representing 5% of the expected full-year 2025 consensus operating profit.

The company also noted that planned maintenance shutdowns are expected to impact operating profit by SEK450 million in 2026.

Boliden’s capital expenditure for fiscal year 2026 is projected at SEK15 billion, 7% below RBC estimates but 11% above consensus forecasts.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Alteogen shares plunge after Merck loses German court battle

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Investing.com -- Alteogen shares plunged as much as 12% on the Kosdaq exchange on Friday, marking the stock’s biggest drop in more than a year, after its partner Merck faced a legal setback in Germany.

The sharp decline made Alteogen the worst performer in the MSCI Asia Pacific Index on Friday.

The selloff came after Halozyme Therapeutics announced that a German court granted its request for a preliminary injunction against Merck.

The court order requires Merck to halt the distribution and offering of Keytruda SC, a cancer drug, in Germany.

The legal decision represents a significant blow to Merck’s distribution plans for the cancer treatment in the German market, directly impacting Alteogen as Merck’s partner in the venture.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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FTSE 100 today: Stocks gain, pound stays strong; Ocado soars, Big Yellow drops

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Advanced Micro Devices

Investing.com -- British stocks gained in Friday morning trade as the pound stayed firm against the dollar, with analysts saying the rally reflects a short squeeze rather than a fundamental reassessment of UK sovereign risk, while wider European markets traded in the green.

As of 0925 GMT, the blue-chip index FTSE 100 rose 0.2% and the British GBP/USD gained 0.2% against the dollar to above 1.33.

DAX index in Germany rose 0.3%, the CAC 40 in France gained 0.3%.

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UK round up

Ocado Group PLC (LON:OCDO) shares jumped around 10% in London trading after the company announced it will receive a $350 million cash payment from Kroger.

The payment comes after the U.S. retailer decided to close three robotic fulfillment centers and cancel plans for another site. Kroger will make the payment in January, reflecting its decision to shut three customer fulfillment centers (CFCs) in early 2026 and abandon the planned Charlotte, North Carolina facility.

In other UK market news, shares of Big Yellow Group PLC (LON:BYG) fell 5.3% after Blackstone Europe announced it would not proceed with a takeover offer for the company. The decision follows Big Yellow’s announcement on Thursday that it had concluded there was "no basis to continue discussions" with Blackstone and would not extend the put-up or shut-up deadline of December 8, 2025.

Blackstone confirmed in a regulatory filing that it has no intention to make an offer for Big Yellow, triggering restrictions under Rule 2.8 of the City Code on Takeovers and Mergers.

The UK housing market showed signs of cooling as house prices held steady in November, showing no monthly change after a 0.5% rise in October, according to the Halifax House Price Index. The average property price edged up by just £139 to reach £299,892, marking another record high despite the slowdown in growth momentum. Annual price growth decelerated to 0.7%, down from 1.9% in October, the weakest rate since March 2024.

In currency markets, sterling continues its upward trend. ING analysts suggest the current rally represents a short squeeze rather than a fundamental reassessment of UK sovereign risk. The bank noted that the 10-year Gilt swap spread has maintained its modest narrowing and currently stands at 48 basis points, down from 58 basis points in late September.

ING maintains a year-end GBP/USD target of 1.34 but expects some sterling underperformance against the euro as the Bank of England resumes its easing cycle this December.

In analyst actions, J.P. Morgan initiated coverage of UK food-to-go chain Greggs PLC (LON:GRG) with an "overweight" rating and a 2,110p December 2027 price target. This implies about 35% upside from the stock’s 1,590p close on December 4. The bank cited a valuation that has fallen to trough levels despite what it describes as sector-leading operating metrics and clear catalysts for recovery.

Separately, J.P. Morgan has adopted a more cautious stance on European oil and gas equities heading into 2026, citing tighter valuations and projected oil oversupply pressures.

In its EU Oils 2026 Outlook released Friday, the brokerage noted that the sector experienced "significant positive decoupling" during the second half of 2025. European oil stocks outperformed the broader European market by 6% despite weakening crude benchmarks, with Brent declining 7% during the same period.

J.P. Morgan now considers valuations to be "full," pointing to an estimated 2026 free cash flow yield of 7.8% at $62/bbl Brent, which it describes as rich compared to long-term averages.

Halma PLC (LON:HLMA) has acquired E2S Group Ltd for £230 million in cash, expanding its presence in industrial safety markets.

The acquisition will be funded from Halma’s existing facilities and supports the company’s continued expansion into fire detection and alarm systems.

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James Halstead reports robust UK and North American markets

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Federal Agricultural Mortgage-C

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Netflix

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Advanced Micro Devices

Investing.com -- James Halstead PLC, a UK manufacturer and global seller of commercial flooring, provided a trading update at its 110th Annual General Meeting on Friday.

Chairman Mark Halstead, in his first AGM as Chairman, reported that the company will approve another record final dividend of 6.05p per ordinary share, marking the 49th consecutive year of dividend increases.

Cash balances since the full year end have increased and are in line with comparatives.

As the company approaches its half-year point, revenues within the UK and North American markets have remained robust. However, challenges in the Central European and Asia Pacific regions have continued.

The company stated it is monitoring and controlling costs to mitigate these challenges.

The Chairman expressed confidence in the company’s future, citing ongoing product and process improvements that offer opportunities for continued profitable growth, echoing sentiments previously noted in the 2025 Annual Report & Accounts.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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