On Friday, Barclays (LON:BARC) updated its outlook on two major companies, reflecting different market conditions and future expectations. For retail giant Walmart (NYSE: NYSE:WMT), the firm raised its price target to $90.00 from $78.00 while maintaining an Overweight rating on the stock. This adjustment comes as the market evaluates the company's current performance and future prospects.
In contrast, the outlook for Warner Music Group (NASDAQ: NASDAQ:WMG) was less optimistic, with Barclays lowering its price target from $40 to $37. This decision followed Warner Music Group's FY4Q24 results, which revealed slower growth in recorded music subscription streaming and ad-supported revenue. The firm also provided a cautious multi-year outlook for subscription streaming revenue growth. Despite these challenges, the analyst noted a sustained outlook for margin expansion and free cash flow conversion.
Barclays revised its revenue outlook for Warner Music Group, projecting a decrease of approximately 1-3%, while expectations for adjusted OIBDA and free cash flow were also reduced by 3-5% and 2-4%, respectively, for the year 2025 and beyond. The lower price target of $37, down from $40, still indicates a potential total return of 21%.
The firm acknowledged the near-term hurdles in subscription streaming revenue growth, but it remains confident in the long-term structural tailwinds supporting the music industry. The analyst believes that the company's scale, global reach, and leadership in artist discovery and development offer an attractive growth-adjusted multiple for investors. Warner Music Group's shares are currently trading at 12.9x 2025 estimated Adjusted EBITDA and 20.8x 2025 estimated Free Cash Flow, which the firm considers appealing given the company's market position.
In other recent news, Walmart Inc. has been the center of attention following strong third-quarter performance. Firms such as KeyBanc Capital Markets and Piper Sandler have maintained their Overweight ratings on Walmart, with KeyBanc raising its price target to $96.00 and Piper Sandler keeping theirs at $93.00. Both firms highlighted Walmart's significant market share gains and robust growth across all business segments.
Baird and Guggenheim also increased their price targets to $100, maintaining their positive ratings on Walmart. They emphasized the retail giant's robust digital expansion and successful scaling of higher-margin revenue streams. Additionally, RBC Capital Markets raised Walmart's price target to $96, maintaining an Outperform rating, and highlighted the company's ability to meet high expectations.
Walmart's third-quarter earnings report exceeded expectations, with an adjusted earnings per share (EPS) of $0.58, surpassing analysts' projection by $0.05. The company's consolidated revenues increased by 5.5%, and U.S. comparable sales rose by 5.3%, exceeding the 4.0% estimate. Global eCommerce sales also showed robust performance, increasing by 27%, with a 22% rise in the U.S. market.
These are recent developments that have been positively received by analysts. They attribute Walmart's success to strategic initiatives including expansion into advertising, merchant solutions, and last-mile delivery. Despite the positive outlook, analysts also pointed out potential risks such as Walmart's high price-to-earnings ratio and the need for consistent execution.
InvestingPro Insights
Walmart's recent performance aligns with Barclays' optimistic outlook. According to InvestingPro data, Walmart's stock has shown impressive momentum, with a 73.75% total return over the past year and a 35.85% return in the last six months. The company's market capitalization stands at a robust $710.5 billion, reflecting its dominant position in the retail sector.
InvestingPro Tips highlight Walmart's financial strength and market position. The company has maintained dividend payments for 52 consecutive years, demonstrating a commitment to shareholder returns. Additionally, Walmart is recognized as a prominent player in the Consumer Staples Distribution & Retail industry, which supports Barclays' Overweight rating.
However, investors should note that Walmart is trading near its 52-week high, with a P/E ratio of 36.23, which may indicate the stock is somewhat expensive. For a more comprehensive analysis, InvestingPro offers 18 additional tips, providing deeper insights into Walmart's financial health and market position.
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