October 10, 2005

WM Stock Way Undervalued?

Bobby Gerry posts a Barron's article that gives pro-Wal-Mart stock analysts the center stage. (The original is subscriber-only). It contains two arguments that I do not believe: 1) high gas prices mean higher revenues, 2) these revenues come from customers of traditionally upper-scale merchants:

While analysts have voiced concerns that high gas prices will crimp consumer spending, that view may prove to be short-sighted. Wal-Mart's customer base could very well widen in tough times, with the stores maintaining their lower-income base and gaining some higher-income consumers who are looking to save some money. The first look at winter heating bills just might convince some Bloomingdale's shoppers that the time has come to step down to Wal-Mart.
I don't believe that Wal-Mart's own analysts think this will happen.

Posted by Kevin on October, 10 2005 at 07:15 AM