Walmart's (WMT 1.54%) stock has rallied nearly 50% over the past 12 months as the S&P 500 rose 6%. The retail giant outperformed the market even as concerns of higher tariffs, sticky inflation, and elevated interest rates dragged down other stocks. Let's see why Walmart weathered those headwinds and if its stock can head even higher in a year.
Why did Walmart impress its investors?
Walmart is one of the few big-box retailers that survived the retail apocalypse of the past two decades. It stayed relevant by renovating its stores, upgrading its e-commerce marketplace, using its brick-and-mortar stores to fulfill online orders, and matching Amazon's prices. It also expanded into more overseas markets and opened more Sam's Club stores to compete with Costco in the warehouse club market.
Image source: Walmart.
From fiscal 2015 to fiscal 2025 (which ended this January), Walmart's revenue rose at a compound annual growth rate (CAGR) of 3% as its EPS grew at a CAGR of 4%. It bought back 17% of its shares over the past decade, and it's a Dividend King that has raised its payout annually for 52 consecutive years.
At the end of fiscal 2025, Walmart was serving roughly 270 million customers per week across 10,750 stores and numerous online marketplaces in 19 countries. It's also locking more of its customers into its Walmart+ subscriptions, which provide free shipping and returns, fuel discounts, streaming services through Paramount Plus, as well as other perks -- to counter Amazon's Prime memberships. Walmart even acquired the smart TV maker Vizio for $2.3 billion last December as a response to Amazon's Fire TVs and to expand its own connected TV advertising business.
That diversification and scale give Walmart an edge against many of its smaller competitors, so it's often considered a reliable stock to hold during bull and bear markets. That's probably why investors still bought the stock as the broader market swooned.
NASDAQ: WMT
Key Data Points
What will happen to Walmart over the next 12 months?
In fiscal 2025, Walmart's net sales rose 5.1% -- with Walmart's U.S. sales rising 4.7%, Sam's Club's U.S. sales increasing 4.7%, and Walmart's International sales growing 6.3%. Its adjusted EPS grew 13.1%.
For fiscal 2026, Walmart expects its net sales to rise 3% to 4% as its adjusted EPS grows between 0% and 4%. Both growth rates will be throttled by temporary headwinds from its acquisition of Vizio, the lapping of an extra day from its leap year in fiscal 2025, and currency headwinds from a strong dollar.
Yet Walmart doesn't seem particularly concerned about tariffs, even though the vast majority of its goods are produced in China and other overseas markets. During its latest conference call in late February, CEO Doug McMillon said, "Tariffs are something we've managed for many years, and we'll just continue to manage that." CFO John Rainey added that "We feel good about our ability" to deal with those incoming tariffs.
Walmart, like many other U.S. retailers, will likely try to deal with those tariffs in three ways: leveraging its scale to negotiate lower prices with its overseas suppliers, pre-shipping more overseas products to U.S. warehouses before the tariffs kick in, and gradually passing those costs onto its consumers. Combining all three of those strategies could cushion the blow and prevent it from having to absorb too many of those higher costs.
Where will Walmart's stock be in a year?
Wall Street analysts seem even more optimistic about Walmart's future than the company's own management. Assuming the macro environment stabilizes, they expect Walmart's adjusted EPS to grow by 5% in fiscal 2026 and 12% in fiscal 2027.
Those growth rates are healthy, but Walmart's stock looks expensive at 33 times forward earnings -- presumably because it drew in a lot of investors as a safe haven play over the past year. A year ago, it was only trading at 24 times forward earnings.
If Walmart matches analysts' expectations and maintains the same forward multiple, its stock could rise 9% to $97 by the beginning of fiscal 2027 (February 2026). But if its forward price-to-earnings ratio slips to 24, its stock would drop 20% to $71.
So, while Walmart is still a well-run business and a sound long-term investment, its upside potential over the next 12 months could be limited by its valuations. Its forward dividend yield of 1.1% also won't impress any income investors, so it would be prudent to wait for a pullback to accumulate more shares of this evergreen retailer.
