NEW YORK (TheStreet) -- Walmart (WMT - Get Report) shares were downgraded to "underperform" from "market perform" by analysts at William Blair on Tuesday.
Walmart is down -0.5% to $77 in pre-market trading today.
The firm cites e-commerce competition and a market shift away from big box retailers as a reason for the downgrade.
"We have reduced our rating on Wal-Mart to Underperform. Our main concerns are Wal-Mart's size and complexity, which reduces dynamism and growth; incremental risks with e-commerce competition, particularly as Wal-Mart's large stores are less favorably positioned for a consumer who is increasingly buying individual items online; and the prospect of sector rotation away from retailers at this stage of the economic cycle" William Blair said in a research note to clients," analysts said in their note.
Separately, TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate WAL-MART STORES INC (WMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WMT's revenue growth has slightly outpaced the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has slightly increased to $9,937.00 million or 2.61% when compared to the same quarter last year. In addition, WAL-MART STORES INC has also modestly surpassed the industry average cash flow growth rate of -7.09%.
- WAL-MART STORES INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.30 versus $4.86).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WMT Ratings Report