Walmart and Target are both retailers and therefore competitors, it doesn’t have to be Walmart v target, you could own both. However, Walmart’s stock tanked after their earnings report while Target’s popped after their earnings. Target’s stock has been beaten up for a couple of declining quarters starting on Q1 report in April. Walmart’s tanking might have occurred simply because the stock has been on a run during that same period of time. Walmart was also cautious about the future consumer spending.

The main difference between Target and Walmart is the demographics that they serve. Target aims for a more upscale shopper while Walmart aims to be the everyday low price leader. It would make sense for Walmart to be cautious about the future but in reality, most retailers should be worried about the upcoming economy.

The Numbers

Walmart beat on the revenue and earnings for the third quarter. The earnings was 1.53 reported vs 1.522 estimated, a surprise beat of 0.51%. The revenue was 160.804 billion reported vs 159.651 billion estimated, a surprise beat of 0.72%. So Walmart beat on both top and bottom line but ended up falling over 7% for the day from $179 to around $157. This price movement essentially erased all the gains from the Q2 earnings report where the stock was trading around $155, it also beat earnings and revenue for Q2 as well but by bigger margins.

Target on the hand is Walmart’s competitor but much smaller in reach and revenue. However, Target had a different reaction after earnings than Walmart. After Target’s Q3 earning. the stock popped over 17% after earnings beat of over 41% with 2.1 reported vs 1.474 estimated. Target’s revenue also beat but not as much 25.398 billion reported versus 25.285 billion estimated, beating estimates by 0.75%.

Outlook

Walmart beats Target on revenue as it is a bigger company, but percentage wise it also beats on revenue from quarter 2 to quarter 3. Target stock only seem to be benefitting from this positive report because of the dismal performance starting from Q1 report in April where the stock was trading around 160. It steadily declined up until the recent Q3 report. Also, statements can affect the movement of a stock. Target’s CEO exclaims that they have clamped down on theft by locking away items. This has resulted in more items being in stock and a reduction in theft.

Locking away items from consumers is not new to Walmart but this is different for Target. Walmart’s stock did not fare as well as Target’s, partly due to comments about being concerned about consumer spending weakening.

Walmart v Target

Walmart is a bigger company in terms of revenues, number of stores, and number of customers. Target appeals to a more affluent customer base. However, if Walmart is worried about consumer spending, then Target should also be worried about consumer spending. Target’s consumers might not appreciate items being locked away. If Target’s customer base experience economic headwinds, they might go to Walmart instead. From an investing perspective, Target’s stock is much cheaper than Walmart with a P/E ratio of 16.617 v 32.695.

Thoughts? Which stock do you prefer?

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