Thursday, 15 October 2015

US Market has got it wrong today pricing in Walmart weakness!

Dear Friends,

Today Walmart biggest ever price drop in one single day has caused Dow to drop by triple digit figure. Currently at 3am Local time, Dow has dropped by 160 points.

In the market, traders are thinking this may be a sign of economic weakness. People are also worried about Walmart sustainable earnings in the next 2 years. My opinion is different.

Firstly, I don't think Walmart drop will not affect the rebound of the US stock market. In the last 2 days, Dow Jones has put a stop to its rise, but I think it will go up soon. In fact I do think very well of US 4th quarter amid the holiday season. Walmart fall won't hurt the track of stock market much!

Secondly, I think the market got it wrong on Walmart. This is the article on Walmart by marketwatch:
http://www.marketwatch.com/story/wal-mart-shares-crater-as-company-outlines-spending-plans-20-billion-share-buyback-2015-10-14?link=MW_home_latest_news

I always say that market is always short sighted. Today it really shows in Walmart stock price!



Walmart announces that it is going to spend more money on e-commerce and adjust its wage plan to give more wages to its workers. Sensing that its earnings will drop next year, the market shorted it down.

However I don't really think the market got this right. Customers are still continuously shopping at the largest hyper market in the world! They are facing competition, and that is the reason they need to innovate and think of new strategies. That is why they are spending big on e-commerce, which is a pie that is untouched in the past.

If they are successful, this might lead to bigger earnings and one big leap in the history of Walmart. If they are successful, Amazon will be the one that should be worried, and not Walmart worrying about Amazon, now currently the largest online retailer. Amazon these past few years have also spent tremendous sum of money in its technology and is not making as much as Walmart.

As the saying goes, it is not easy to turn around a battleship. But Walmart is one big company that at least keep trying to innovate and lead in the last 50 years, from its innovative supply chain management to mobile technology tagging system to e-commerce retail now!

Why don't we give this stock another chance???




Rgds
Daniel
www.danielloh.com


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