JP Morgan Downgrades Wal-Mart to Neutral Status

Monday, February 14th, 2011

Wal-Mart Stores Inc. posted troubling financial data for its final quarter, but JPMorgan contends this is not the sole reason why they have decided to downgrade the stock to neutral status. Wal-Mart lost 1.6 percent on the Dow Jones Industrial Average today bringing it to $54.80 per share. Despite this, the stock is overall up 2 percent in the past year including the drawback it posted today. This marks the biggest drop in stock prices on the Dow today.

According to Market Watch, JP Morgan simply does not see innovation in the near future that would drive the stock out of the $45 to $60 price range it has traded at for the past few years. They maintain that the basis for their decision is rooted in broader trends that will continue to plague the company including consumer traffic, reduced shares in core consumable sectors, as well as overall discretionary weakness. Inventories have also been targeted as something that remains too high, as well as the free cash flow is impeded by the international acquisitions Wal-Mart is currently undertaking. These trends are likely to endure throughout the remainder of the year. JP Morgan has revised its forecasted price for the stock from $59 per share to $54 per share according to the same article.

Internationally, the stock is also forecasted by Deutsche Bank to decline in the near future. Despite the fact that company originally profited from the economic downturn starting in 2007 when buyers started mobilizing toward cheaper, generic food and pharmaceutical items provided by the company, it now seems that the company is losing out on its share of the ‘grocery item’ market. This has precipitated a loss in the lower-income bracket of consumers. Reports indicate this demographic is increasingly seeking out dollar stores and drug stores, while higher income brackets have taken the recent encouraging data about the economy, to move back up to more expensive shopping venues.



Article by Andrew Timm

The views expressed are the subjective opinion of the article's author and not of

Tags: dow jones , jp morgan , wal-mart