Walmart stock is currently experiencing a certain level of calm, and if you’ve been watching markets long enough, you’ve learned to be a little wary of calm. Last Thursday, the shares closed at about $131, down a small amount for the day, barely registering against a run that has raised the stock by about 18% since January. Investors appear to think the business has discovered something long-lasting. When Walmart releases its fiscal first-quarter results on Wednesday of next week, it will be unclear if they are correct.
You can learn more from the scene when you walk into nearly any Walmart on a weekday afternoon than from a spreadsheet. The parking lots are packed. The grocery aisles move steadily, particularly the fresh sections that the company has been subtly upgrading for years. What has changed is who is pushing the carts, and this is the aspect that continues to surprise me. Households making over $100,000 annually have contributed significantly to Walmart’s recent success; ten years ago, these consumers might have driven right by the store. Analysts keep coming back to that migration more than any one earnings line.
The consensus on Wall Street has become nearly unanimous. Twenty-eight of the thirty analysts give the stock a buy rating, which is the kind of agreement that usually makes me want to investigate further rather than unwind. Peter Keith of Piper Sandler increased his goal to $137, pointing out that despite rising gas prices, consumer spending remained stable. He also noticed something more pointed: although tax refunds were high this quarter, there was little indication that the money was going into retail establishments. Instead, people saved it. That particular detail conveys a subtle message about how cautious American households are still.
Zhihan Ma of Bernstein went one step further, raising his goal to $145 and claiming that new stimulus programs would help stores catering to affluent consumers. It’s a bold decision. Additionally, it’s the type of forecast that relies on consumer behavior assumptions that are currently unverifiable.
The source of the growth is truly intriguing. The grocery industry is still the main driver; nothing has changed. However, a recent quarter saw a more than 50% increase in advertising revenue, which was aided by Walmart’s 2024 acquisition of the TV manufacturer Vizio. Physical stores double as fulfillment centers for same-day delivery, while e-commerce continues to grow at a rate of about 27%. There’s a feeling that Walmart is gradually evolving into a new business while maintaining the foundation of the previous one.
Years ago, when belief outpaced proof for a considerable amount of time, Tesla had to deal with this kind of expectation curve. Although Walmart’s situation is more favorable—it is already enormous and profitable—the dynamic is similar. The stock is currently trading at a price-to-earnings ratio close to 48, which is rich for a retailer. However, this figure is predicated on the high-income customers remaining, the advertising industry continuing to compound, and consumer patience not being broken by inflation.
It’s difficult to ignore how much depends on a single week. The clearest picture of American spending to date is provided by Walmart, Target, and other major retailers, who all report within days of one another. The optimism might be supported by the numbers. They could also show that the serenity was not as strong as it appeared. In any case, it feels more like watching a wager being placed than it does like reading a balance sheet.
