After a door-busting 2024 with Walmart (WMT +0.45%) shares soaring 74% on robust growth and earnings, the start of 2025 has proven to be a tougher aisle to navigate. The stock price has rolled back by about 19% from its recent all-time high, pressured by muted company guidance. Concerns regarding the strength of the U.S. economy have added a new wrinkle of uncertainty for investors to grapple with.
Let's discuss where Walmart shares might be in one year.
NASDAQ: WMT
Key Data Points
Underlying fundamental strength
Beyond any stock price volatility or the noise from quarterly financials, the allure of Walmart as a possible investment lies in its leadership as a top global retailer. Operating more than 10,750 stores across 19 countries, the company is globally diversified with a loyal customer base attracted to its everyday low prices. This profile, coupled with outstanding fundamentals, makes Walmart a blue chip stock poised to thrive for decades.
Nevertheless, the company's performance last year (its fiscal 2025) set a high benchmark that will be hard to beat anytime soon. For the full year ended Jan. 31, Walmart's net sales climbed by 5.6% year over year on a constant currency basis, while the 13.1% increase in adjusted earnings per share (EPS) to $2.51 far surpassed its initial target of around $2.30. Walmart benefited from a resilient global economy and a stronger-than-expected U.S. consumer, with management citing increased transaction levels and unit volumes across markets.
A large part of that success has been the company's e-commerce segment, which posted a 20% sales increase during the fourth quarter, contributing to more than half of the region's comparable store sales increase this year. This trend is important not only as a growth driver but also suggests that Walmart appears to have finally cracked the code to better compete with rival Amazon online, leveraging the scale of its physical store network as a unique advantage.
Image source: Getty Images.
Disappointing guidance
Despite Walmart's strong performance last year, its guidance for fiscal 2026 left much to be desired. The company expects annual constant currency net sales growth between 3% and 4%, representing a modest slowdown. The bigger disappointment came with the EPS target range of $2.50 to $2.60, which, at the midpoint, is just a low-single-digit increase from fiscal 2025 and well below the consensus among Wall Street analysts of around $2.76.
| Metric | Fiscal 2025 | Fiscal 2026 Estimate |
|---|---|---|
| Constant currency net sales growth (YOY) | 5.6% | 3% to 4% |
| Adjusted EPS | $2.51 | $2.50 to $2.60 |
| Adjusted EPS growth (YOY) | 13.1% | (-0.4%) to 3.6% |
Data source: Yahoo! Finance. YOY = year over year.
Even as management emphasized the underlying strength of the business, one interpretation is that Walmart could be seeing some pockets of weakness in consumer spending, leading to a more cautious approach. This is all against a backdrop in which the new Trump administration is moving forward with trade tariffs, alongside mixed indicators on everything from the labor market to the direction of interest rates. This unpredictability could significantly disrupt Walmart's supply chain and pricing strategy, given the retail giant's heavy reliance on goods imported from countries like China, posing some downside risk to earnings that investors will need to consider.
The result is a new layer of uncertainty, also reflected in the broader stock market sell-off in recent weeks. From Walmart's historically lofty valuation at the start of the year, trading at nearly 40 times its consensus fiscal 2026 EPS as a forward price-to-earnings (P/E) ratio, the stock has pulled back to the current level closer to 32. However, Walmart's earnings premium is still slightly above its five-year average P/E ratio of 31. By this measure, even after the correction, Walmart shares don't necessarily stand out as a bargain.
WMT PE Ratio (Forward) data by YCharts
My prediction for Walmart stock
Given Walmart's role within the consumer goods sector, the company is highly connected to how conditions in the global economy evolve going forward. As a result, my prediction is for the stock to remain volatile, at least until there is better clarity on whether the recent economic jitters signal a deeper slowdown or just a temporary hiccup. While I'm not convinced Walmart is a screaming buy just yet, shares could rise by this time next year, with plenty of reasons for patient investors to continue holding. Ultimately, Walmart is well positioned to navigate any operating environment and reward shareholders over the long run.
