Walmart Down 23% Despite Strong Earnings Growth
Walmart (NASDAQ:WMT) is trading at $104.26, a 23% drop from its 52-week high of $134.84. Despite a strong second-quarter earnings beat, weak guidance for the third quarter triggered 29 downward revisions to earnings per share (EPS) estimates, causing the selloff. Adjusted EPS for Q2 was $0.81, surpassing the $0.74 consensus, with revenue rising 5.9%. However, management's third-quarter EPS guidance of $0.62 to $0.64 fell short of expectations, leading to a consensus drop to $0.6352.
Ivan Feinseth of Tigress Financial remains optimistic, setting a $155 price target for Walmart, suggesting a 48.7% upside. He highlights strong growth in advertising (38%), marketplace sales (52%), and e-commerce (20%+ for 10 straight quarters). Walmart's $25.1 billion buyback program and raised full-year EPS guidance of $2.80 to $2.87 support the bullish case, but reaching $155 would require significant multiple expansion.
Analysts are generally positive, with 10 rating Walmart a Strong Buy, 27 a Buy, 5 a Hold, and 1 a Strong Sell. The average analyst price target is $126.78, implying 21.6% upside. However, recent analyst revisions have been bearish, with 25 cuts and only 4 raises to the fiscal year EPS estimate, now at $3.2255. Near-term catalysts include third-quarter results and potential market share gains from price rollbacks funded by $2.9 billion in tariff refunds.
While Walmart struggles, competitor Target (NYSE:TGT) has surged 63.92% this year to $155.99. Walmart's consensus upside makes it the clearest case of a disconnect between share price and analyst targets. The bullish outlook hinges on sustained growth in high-margin businesses and successful price rollbacks, but risks include rising fuel costs and pharmacy deflation.