Last Update 14 Dec 25

Fair value Increased 0.90%

WMT: AI Commerce And New Leadership Will Support Balanced, Steady Performance Ahead

Analysts have nudged our Walmart fair value estimate modestly higher to about $119 from $118. This reflects slightly faster expected revenue growth, improving profit margins, and confidence in the company’s strengthened earnings trajectory and raised price targets following consistently strong Q3 results and momentum across income cohorts.

Analyst Commentary

Street research on Walmart remains skewed positive, with multiple bullish analysts lifting price targets into the low to mid $120s and $130s, reflecting greater conviction in both the near term earnings trajectory and multi year structural advantages. The tone of recent commentary emphasizes resilient comp trends despite a softening low income consumer, expanding alternative profit pools, and the potential for leadership in agentic commerce.

While the bulk of revisions are constructive, there are also emerging areas of scrutiny around macro sensitivity, competitive intensity, and execution risk tied to leadership transition and technology driven initiatives.

Bullish Takeaways

Bullish analysts highlight Walmart’s consistent outperformance versus other big box peers in Q3, viewing the company’s ability to grow comps against a weakening backdrop as evidence of durable share gains and superior execution.
Several target hikes into the $120 to $130 range are tied to confidence that higher income households are increasingly adopting Walmart for both grocery and general merchandise, which supports a richer mix and more resilient traffic.
Alternative revenue streams such as advertising and e commerce are seen as key drivers of margin expansion and multiple support, with strong growth in these businesses underpinning higher outer year earnings estimates.
Recent commentary around agentic commerce and Walmart’s AI initiatives suggests upside optionality to the long term growth algorithm, as the company leverages scale and data to deepen engagement and monetization.

Bearish Takeaways

Bearish analysts caution that increased pressure on the low end consumer, including headwinds from reduced SNAP benefits, could weigh on traffic and basket size for a core portion of Walmart’s customer base, potentially tempering near term sales leverage.
There is some concern that Walmart’s aggressive price posture in grocery to defend and grow share during a period of disinflation may constrain gross margin upside and limit valuation re rating if competitive responses intensify.
The upcoming CEO transition, while broadly viewed as orderly, introduces a degree of execution risk as investors assess continuity of strategy and the pace of investment in new growth vectors such as agentic commerce and alternative profit pools.
Some more cautious views argue that, after a strong run and multiple target hikes, much of the near term fundamental strength may already be reflected in the stock, making further upside more dependent on continued outperformance versus elevated expectations.

What's in the News

Walmart is piloting ads inside its new AI shopping agent, Sparky, turning conversational shopping into a potential high margin advertising channel and expanding its alternative profit pools (Wall Street Journal).
The retailer is in talks to acquire Israeli startup R&A Data, aiming to strengthen its ability to combat scams and counterfeits across online marketplaces and bolster trust in its ecommerce ecosystem (CNBC).
Walmart CEO Doug McMillon said AI will reshape the workforce and change literally every job at the company, as Walmart plans to keep headcount roughly flat while shifting roles and skills toward technology enabled work (Wall Street Journal).
Walmart has implemented a new raise strategy for hourly store workers that ties pay progression more closely to attendance, teamwork, and store performance, sharpening incentives for in store execution (Business Insider).
The company continues to be cited as a leading case study on retail labor strategy, with a decade of wage and workforce investments now associated with higher employee retention and a stock price that has more than doubled over five years (Wall Street Journal).

Valuation Changes

The fair value estimate has risen slightly to approximately $119 from about $118, reflecting a modest upgrade to the long term outlook.
The discount rate has fallen marginally to roughly 6.99 percent from about 7.01 percent, modestly increasing the present value of projected cash flows.
The revenue growth assumption has edged higher to around 4.92 percent from roughly 4.89 percent, signaling slightly stronger expected top line expansion.
The net profit margin has increased modestly to about 3.51 percent from roughly 3.44 percent, indicating incremental confidence in profitability improvements.
The future P/E multiple has declined slightly to about 40.0x from roughly 40.5x, tempering the valuation applied to forward earnings despite the stronger fundamentals.

Strategic focus on omni-channel experiences, AI adoption, and rapid delivery deeply integrates digital and physical retail, enhancing customer retention and operational efficiency.
Diversification into higher-margin streams and international expansion strengthens earnings resilience and transforms Walmart's profit mix beyond traditional retail.
Rising costs, competitive pressures, and international challenges threaten Walmart's margin expansion and profitability, while digital growth remains offset by operational inefficiencies and capital demands.

Catalysts

About Walmart

Engages in the operation of retail and wholesale stores and clubs, eCommerce websites, and mobile applications worldwide.What are the underlying business or industry changes driving this perspective?

Rapid growth in global e-commerce (25% YoY, with 26% in the US and >20% internationally) and investment in fast, seamless omni-channel experiences (e.g., delivery from stores within 3 hours to 95% of US households by year-end) position Walmart to benefit from ongoing consumer preference for integrated digital and physical shopping, underpinning sustained revenue growth and increased customer retention.
Aggressive adoption of AI for both customer engagement (Sparky assistant, personalization) and supply chain/logistics (digital twins, predictive delivery windows, inventory management) is likely to drive future cost reductions and productivity gains, supporting higher operating margins and profitability.
Expansion of high-margin business streams-Walmart Connect (advertising, up 31-46% globally), marketplace, and Walmart+ memberships (global advertising up 46%, membership income up 15%)-is diversifying Walmart's income base beyond retail, gradually transforming the company's profit mix and resulting in structurally higher net margins and earnings over time.
Strengthening international footprint, notably in fast-growing markets such as China (sales up 30%), Mexico and India, leverages urbanization and middle-class expansion, with localization strategies and tech platform rollouts expected to fuel both top line and bottom line growth.
Walmart's extensive logistics infrastructure, strong inventory/price management, and ability to offer rapid last-mile delivery further entrench its market share as retail consolidates, setting up for durable revenue growth and the potential to consistently grow operating income faster than sales.

Walmart Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Walmart's revenue will grow by 4.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.1% today to 3.5% in 3 years time.
Analysts expect earnings to reach $27.4 billion (and earnings per share of $3.47) by about September 2028, up from $21.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $24.0 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 38.9x on those 2028 earnings, up from 38.2x today. This future PE is greater than the current PE for the US Consumer Retailing industry at 21.7x.
Analysts expect the number of shares outstanding to decline by 0.81% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.87%, as per the Simply Wall St company report.

Walmart Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

While Walmart's e-commerce and digital businesses are growing rapidly, management acknowledged that international e-commerce operations remain loss-making and delivery/logistics costs on grocery continue to pressure net margins; persistent inefficiencies or inability to improve these economics could pose a significant long-term constraint on overall profitability and operating income.
Management highlighted ongoing tariff impacts, with costs rising each week and expected to continue into upcoming quarters-if trade policy uncertainty or supply chain disruptions persist, adjusting consumer prices to offset cost increases could risk revenue growth or force margin compression as Walmart attempts to absorb higher expenses.
Competitive intensity in grocery and digital retail is increasing, with references to major competitors expanding online grocery delivery; this forces Walmart to continually invest in speed, convenience, and customer experience potentially leading to higher capital expenditures and opex, which could erode net margins and slow free cash flow growth if not offset by revenue gains.
Long-term wage inflation and rising costs related to general liability and workers' compensation claims-specifically, $730 million of incremental expense this year and expectations for continued claims cost inflation-raise the risk of sustained SG&A pressure, potentially constraining operating margin expansion and earnings growth.
Walmart's global expansion strategy, particularly in lower-margin, highly competitive and regulatory-complex emerging markets, introduces risk of capital allocation missteps; international segments still operate below group margin levels, so prolonged unprofitability or regulatory/tariff headwinds abroad could drag on consolidated earnings and dilute return on invested capital.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $112.0 for Walmart based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $127.0, and the most bearish reporting a price target of just $64.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $789.9 billion, earnings will come to $27.4 billion, and it would be trading on a PE ratio of 38.9x, assuming you use a discount rate of 6.9%.
Given the current share price of $102.29, the analyst price target of $112.0 is 8.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Omni-Channel Expansion and AI Advances Will Drive Continued Market Leadership