After Earnings, Is Walmart Stock a Buy, a Sell, or Fairly Valued?

Walmart WMT released its first-quarter earnings report on May 15. Here’s Morningstar’s take on Walmart’s earnings and stock.

Key Morningstar Metrics for Walmart

• Fair Value Estimate: $64.00
• Morningstar Rating: ★
• Economic Moat: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Walmart’s Q1 Earnings

Walmart’s top line increased by 2.5% in the first quarter (4.0% in constant currency), led by comparable sales growth of 4.5% at its domestic stores and 6.7% at Sam’s Club. Adjusted EPS of $0.61 improved $0.01 from last year.

Why it matters: Walmart delivered strong top-line growth despite grappling with an uncertain economic backdrop. We expect the retailer’s scale and attractive pricing position to resonate with cautious consumers and yield continued market share gains in coming quarters.

• Walmart’s namesake stores delivered mid-single-digit growth in grocery sales, outpacing the 2% average annual growth in food at home inflation from February to April 2025. Market share gains in high-frequency categories should bode well for customer retention longer term.
• Management noted that tariffs will result in higher prices for select product categories. Higher prices and weak consumer sentiment will likely weigh on near-term demand, but we think Walmart’s scale and attractive price points should allow it to outperform smaller peers.

The bottom line: We plan to raise our $63 fair value estimate on wide-moat Walmart by a low-single-digit percentage due to the time value of money. Still, shares look overvalued, in our view, trading at 35 times our forecast for fiscal 2026 EPS.

• Results closely aligned with our forecast, and we don’t plan to materially alter our fiscal 2026 estimates for 4% sales growth and $2.68 in adjusted EPS. We also expect to maintain our 10-year explicit forecast, which calls for average growth in sales and EBIT of 3.5% and 6.5%, respectively.
• We are optimistic that Walmart can take market share during tumultuous economic times and enjoy margin expansion as lucrative revenue streams, such as advertising, scale. Still, given its size, we struggle to see how the firm can grow faster than a mid-single-digit pace in the long run.

Fair Value Estimate for Walmart

With its 1-star rating, we believe Walmart’s stock is significantly overvalued compared with our long-term fair value estimate of $64 per share. We raised our fair value estimate to $64 (from $63 previously) following Walmart’s fiscal 2026 first quarter earnings release due to the time value of money. Results closely aligned with our expectations as 2.5% top line growth (4% in constant currency) was led by a 4.5% uptick in comparable sales at Walmart’s namesake stores, and 6.7% growth at Sam’s Club. Adjusted EPS improved by $0.01 from the prior year to $0.61, slightly outpacing our $0.60 estimate. While tariffs and weak consumer sentiment offer some uncertainty for the remainder of the year, we think Walmart is well positioned to navigate the tumultuous demand backdrop and take market share. As such, we still model fiscal 2026 revenue growth of 4% and adjusted EPS of $2.68.

Over a longer-term horizon, we expect Walmart US (about 70% of total sales) to deliver low-single-digit top-line growth. We note that Walmart has reached its effective peak in physical store count and expect the retailer to instead deliver the bulk of its growth through increases in comparable store sales. Our estimate of 3.0% comparable store sales growth is underpinned by modest growth in both volume and price and slightly exceeds the 2.0%-2.5% organic growth rate that Walmart US posted over the past two decades. We believe Walmart is making the requisite investments today to continue attracting consumers to its stores and driving customer loyalty. We expect e-commerce penetration to exceed 20% of domestic sales by the end of our explicit forecast, but we don’t view the firm’s omnichannel investments as being a catalyst for pronounced organic growth. Rather, we view the firm’s investments as an opportunity for Walmart to solidify its existing customer base and take some incremental share from smaller brick-and-mortar retailers that fail to adapt to consumer trends.

Read more about Walmart’s fair value estimate.

Economic Moat Rating

We believe Walmart warrants a wide economic moat rating, underpinned by a ubiquitous brand resembling low prices in its domestic market and a cost advantage. Walmart is a leading retailer in the United States, with over $460 billion in annual sales and a massive store footprint of over 4,600 domestic namesake locations. Despite the fragmented and competitive landscape that is inherent in retail, we surmise that Walmart has carved out an enviable position, as the firm benefits from its proximity to the vast majority of US consumers, driving repeat foot traffic.

Read more about Walmart’s economic moat.

Financial Strength

We believe Walmart boasts a solid financial position as its $9 billion of cash on hand, $15 billion of undrawn lines of credit, modest amount of outstanding debt, and history of positive operating cash flows enables the firm to continue reinvesting in the business while making shareholder distributions. Walmart typically keeps its net debt/EBITDA level between 1.0 and 1.6 times, while debt/cash from operations has remained below 2.5 times.

We view Walmart’s debt service payments on its $46 billion of debt as of its fiscal 2026 first-quarter-end as predictable and its 10-year average interest coverage ratio of nearly 12 times is a formidable indicator of Walmart’s ability to seamlessly manage its obligations. The firm’s debt maturities also appear adequately spread out, with most of its long-term debt coming due after fiscal year 2028.

Read more about Walmart’s financial strength.

Risk and Uncertainty

We assign Walmart a Medium Uncertainty Rating. The rise in e-commerce penetration serves as the most formidable threat to Walmart’s traditional brick-and-mortar retail model. While Walmart’s sales are underpinned by grocery items (60% of domestic sales), which tend to be more insulated from online penetration, we surmise Walmart faces tough online competition for sales of general merchandise such as electronics, apparel, and home decor, which is unlikely to abate anytime soon.

Given the higher margins that merchandise sales typically carry over that of grocery, margin pressure could ensue over time if grocery becomes a larger part of its mix. Furthermore, Amazon has entertained the idea of expanding its physical presence in grocery beyond its existing Whole Foods and Amazon Fresh footprint.

Read more about Walmart’s risk and uncertainty.

WMT Bulls Say

• Margin pressure should abate as Walmart’s recent investments in omnichannel fulfillment and its third-party marketplace continue to scale.
• Walmart’s vast grocery offering insulates the firm from digital competition, given the perishability of the merchandise.
• Walmart’s recent investments in supply chain automation should drive margin expansion. The firm may also reinvest the cost savings to hold down prices and drive foot traffic to its stores—a benefit relative to many smaller retailers.

WMT Bears Say

• Walmart’s third-party marketplace and third-party fulfilment capacity pale relative to Amazon’s scale. We posit Amazon can underprice Walmart on commissions, listing fees, and fulfillment services related to its marketplace.
• Sam’s Club has woefully underperformed Costco in recent years, and the brand does not provide a compelling value proposition that would allow Sam’s to take share.
• Walmart’s sales mix of higher margin general merchandise categories stands to decline due to strong digital penetration, prompting long-term margin degradation

This article was compiled by Jacqueline Walker.