Retail giant Walmart WMT is preparing for its first stock split in more than two decades. The company’s 3-for-1 split means investors will receive an additional two shares for each one they already own. The move will increase the firm’s outstanding shares from 2.7 billion to about 8.1 billion. Walmart last did this in April 1999, when it split shares on a 2-for-1 basis.
The Date for Walmart’s Stock Split
The split is set to take place after the market’s close on Feb. 23. Shares will trade on a post-split basis beginning Feb. 26.
Walmart Stock Price
What Walmart’s Stock Split Means
The split won’t affect Morningstar equity analyst Noah Rohr’s view of Walmart’s stock, which he values at $147 per share. After the split, the company’s fair value estimate will be adjusted to $49 per share to account for the threefold increase in its outstanding shares. Walmart’s wide economic moat rating will be unaffected. The stock will still be rated 2 stars (meaning it’s considered overvalued), trading at a premium of 18% as of Feb. 22.
Rohr thinks the company’s strong fourth-quarter results indicate its low prices are continuing to win over consumers, but he warns that the retailer’s guidance for 2025 came in slightly below expectations. “We do not expect pronounced margin expansion in the near term, as we forecast continued softness in the higher-margin general merchandise category and further investments in store remodels after 700 remodels were completed in fiscal 2024,” he says.
Rohr also points to Walmart’s continued investment in its e-commerce capabilities, and he adds that its planned acquisition of Vizio Holding VZIO could bolster its advertising business. “We are encouraged by Walmart’s efforts to distance itself from smaller brick-and-mortar retailers by adapting to consumers’ evolving purchasing preferences, and we expect margins to gradually improve as its digital fulfillment capabilities scale. Management noted that its e-commerce contribution margin is positive, but did not provide a time frame for eventual profitability,” he explains. “That said, we do not expect Walmart’s omnichannel and digital ambitions to culminate in a digital ecosystem similar to its peer, Amazon.com AMZN.”
Other Recent Stock Splits
Walmart’s stock split comes after several other major tech and consumer companies did the same in recent years. Google parent company Alphabet GOOGL/GOOG, electric carmaker Tesla TSLA, and Walmart competitor Amazon all split their shares in 2022.
The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.
This split will increase the number of shares of Walmart's outstanding common stock to approximately 8.1 billion from 2.7 billion shares before the split. Although the stock will trade at a lower price, it won't change the underlying value of existing investments in the company.
[Note: Walmart's Fiscal Year 2024 ended on January 31, 2o24] Walmart stock (NYSE: WMT), the world's largest retailer by revenue, announced a 3-to-1 stock split. That means the number of shares one owns will go up by 3x, i.e, 3 shares now owned for every 1 share previously owned.
A stock split is a corporate action in which a company increases the number of its outstanding shares by issuing more shares to current shareholders. Stock splits can improve trading liquidity and make the stock seem more affordable.
Walmart had a solid quarter and gave favorable guidance for 2024. Capital returns will continue to flow and underpin the rally. Analysts are supportive and leading the market higher; however, waiting for the stock split before buying is a good idea.
Walmart isn't known for its impressive profit margins, but the chain's earnings power is improving. Operating income spiked in the past year and is projected to outpace revenue again in 2024. It's great news for the business, meanwhile, that these gains arrived even as the company cuts prices amid strong sales growth.
A 3-for-1 stock split means that for every one share held by an investor, there will now be three. In other words, the number of outstanding shares in the market will triple. On the other hand, the price per share after the 3-for-1 stock split will be reduced by dividing the old share price by 3.
Share splits, in general, are neither good nor bad. A stock split is takes place when companies want to make their stock look more attractive so investors can buy it. However, as mentioned above, it is usually a good sign that the company is growing and is open to future growth prospects.
Does it matter to buy before or after a stock split? If you buy a stock before it splits, you'll pay more per share than what it'll cost after it splits. If you're looking to buy into a stock at a cheaper price, you may want to wait until after the stock split.
Splitting the stock brings the share price down to a more attractive level. The actual value of the company doesn't change but the lower stock price may affect the way the stock is perceived and this can entice new investors.
A company cannot rely on a stock split to increase its value or market cap. A stock split divides the existing shares, thus keeping the market cap the same as before. Not to forget, a company must invest some amount to conduct a stock split.
Walmart is surging after crushing earnings estimates Thursday morning, adding about $12 billion to the wealth of the Walton family. An investment of $1,000 at the start of 1980 would be worth over $1.9 million today. Watch Walmart stock trade in real time here.
Based on short-term price targets offered by 32 analysts, the average price target for Walmart comes to $65.43. The forecasts range from a low of $58.33 to a high of $71.00. The average price target represents an increase of 9.31% from the last closing price of $59.86.
For shareholders, the total dollar value of their investment remains the same because the split doesn't add real value. The most common splits are two-for-one or three-for-one. A stockholder gets two or three shares respectively for every share held.
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