Stock falls with guidance below expectations. (0:15) OpenAI hits 400 million weekly users. (3:41) Amazon will deliver the next Bond film. (4:11)Show NotesWedbush's Ives defends PalantirAlibaba jumps after resultsEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: Why is Walmart cautious about its future guidance?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Thursday, February 20th, and I'm your host, Kim Kahn. Our top story so far. Walmart's future guidance is spooking investors and shares are sharply lower.
Chapter 2: How did Walmart's Q4 results compare to expectations?
While Q4 results topped analysts' expectations, Outlook, quote, assumes a generally stable consumer and continued pressure from its mix of products and formats globally. The expectation for Q1 sales to be up 3% to 4% should result in EPS between $0.57 and $0.58, and That's down 3-4 cents from a year ago and below the consensus estimate of $65.
For full fiscal year 2026, Walmart also expects sales to improve 3-4%, translating to $698.1 billion at the midpoint with EPS between $250 and $260. This is also less than Wall Street's expectations for EPS of $276 on $705.14 billion in sales. Shares did come off their lows, however, during the earnings call, where CEO Doug McMillan said, The sell side also offered support.
Chapter 3: What are the analysts saying about Walmart's performance?
Jefferies analyst Corey Tarlow said, Morgan Stanley's Simeon Gutman said, Street estimates are likely to be revised down this morning. Similar to fiscal year 2025, we would expect a path of outperformance in fiscal year 2026 and ultimate EPS power exceeding the initial outlook. Walmart also raised its dividend by 13% to $0.235 per share.
Among other active stocks, you heard on Wall Street Breakfast about Palantir's dive in the previous session on potential defense spending cuts, and the stock is sinking again today. Shares are currently down 20% from Tuesday's close.
Chapter 4: Why is Palantir facing market pressure?
But Wedbush analyst Dan Ives came to the company's defense, saying, "...the bears, which have hated Palantir from $12 to $120 in the last 18 months, now have found their latest silver bullet negative thesis around Palantir being exposed to these budget cuts."
Chapter 5: What is the potential impact of defense budget cuts on Palantir?
This is exactly the opposite of how we believe these DoD cuts will play out, as in our view, Palantir's unique software approach will enable the company to gain more IT budget dollars at the Pentagon, not less. And Alibaba is up sharply after topping quarterly consensus numbers. Key takeaways included the beats on revenue, adjusted EBITDA, and cloud intelligence segment sales.
Chapter 6: How did Alibaba's earnings report exceed expectations?
Morgan Stanley said the earnings report strengthened its investment thesis as it made modest upward revisions to its EPS estimates following the print. Meanwhile, Jeffries highlighted that the Alibaba International Digital Commerce Group revenue rose 32% year-over-year to smash expectations.
On the economic front, initial jobless claims rose by 5,000 to 219,000 for the week, a little more than expected. The federal government's campaign to cut costs on fire workers doesn't appear to be affecting D.C. area claims so far. About 20% of federal workers live in the metro area.
Initial claims filed in the District of Columbia arose by 13 to 1695, claims filed in Maryland dropped by 821 to 2354, and claims filed in Virginia declined by 397 to 2805. Samuel Toombs, chief U.S. economist at Pantheon Macro, says any laid-off federal employees likely will file for claims in the coming weeks, particularly if the layoffs broaden out, as seems likely.
Next week's numbers will likely also receive an uplift from extreme winter weather in parts of the country. In other news of note, OpenAI had 400 million weekly active users for ChatGPT as of February. That's a 33% increase from the 300 million as of December 4th, 2024. The company had more than 2 million paying business users compared to 1 million as of September 5th.
Apple's integration of OpenAI's AI models started in December last year. Apple Intelligence relies on a mix of Apple's own AI technology and a collaboration with OpenAI. And Amazon MGM Studios is taking over the creative development of the James Bond franchise, with longtime producers Barbara Broccoli and Michael G. Wilson stepping back.
Amazon MGM, Wilson, and Broccoli have formed a new joint venture to house the intellectual property rights of 007. They'll remain co-owners. Financial terms were not disclosed. Amazon gained distribution rights to all the James Bond movies after it bought Metro-Goldwyn-Mayer for $8.5 billion back in 2022.
With the current announcement, the company will also be responsible for creative control and production of future Bond films. Possible upcoming Amazon bond titles already in development? How about Dr. No Returns? From Russia with free shipping, you only click twice, on Her Majesty's Same Day Service and Live and Let Prime.
And in the Wall Street Research Corner, Goldman Sachs chief economist Jan Hansius says changes in AI-related capital expenditures could see just limited near-term implications, despite the deep-seek scares. He says competition could catalyze higher levels of real hardware spending if it pushes incumbents to invest more to maintain their lead.
Goldman Sachs analysts have, in fact, increased their estimate of 2025 AI-related investment on NAT over last quarter. CapEx expectations for 2025 were revised up by 5% for S&P 1500 companies over the last quarter, but were only revised up by 2% for companies with broad exposure to tariffs and revised down by 1% for companies with a high reported share of sales to Canada, Mexico, and China.
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