Walmart stock rating cut to hold by Erste Group

On Monday, Erste Group analysts adjusted their stance on Walmart Inc. (NYSE:WMT), moving their rating from "Buy" to "Hold." The change in sentiment comes despite Walmart’s reported increase in both sales and operating margin in the fourth quarter. With a substantial market capitalization of $688.73 billion, the retail giant anticipates revenue growth of approximately 3% to 4% year-over-year for the current fiscal year, a pace that is slower than the previous year’s 5.07% expansion. According to InvestingPro data, 22 analysts have recently revised their earnings expectations downward for the upcoming period.

Walmart’s operating income is expected to outpace sales growth, with projections of a 3.5% to 5.5% year-over-year increase. Analysts at Erste Group noted that the company’s high valuation, with a current P/E ratio of 35.41x according to InvestingPro, may hinder a swift rebound in the stock price, especially in the face of an economic downturn. This valuation concern is particularly noteworthy given that Walmart is trading at a high P/E ratio relative to its near-term earnings growth potential.

The retailer’s recent performance has shown positive developments, with a rise in both sales and operating margins in the last quarter. Walmart’s outlook for the year suggests a steady, albeit reduced, growth trajectory in terms of revenue. The company’s operating income is set to potentially grow at a slightly faster rate than sales. InvestingPro analysis reveals that Walmart maintains a strong financial health score of 2.58 (GOOD), operating with a moderate level of debt and having maintained dividend payments for an impressive 53 consecutive years.

Erste Group’s revision of Walmart’s stock rating reflects a cautious approach in light of the company’s valuation metrics. The analysts pointed out that the P/E ratio, a common measure used to assess a stock’s value, suggests a premium price compared to the broader sector. This valuation aspect is deemed to be a potential obstacle for rapid share price recovery if the economy were to experience a downturn.

Walmart has not yet publicly responded to the rating change. Meanwhile, investors and market watchers will likely keep a close eye on the company’s performance in the coming quarters, as well as any shifts in the economic landscape that may impact the retail sector and Walmart’s stock valuation.

In other recent news, Walmart has partnered with Klarna, replacing Affirm as its buy-now-pay-later (BNPL) provider in the U.S. Klarna will become Walmart’s exclusive BNPL loan provider, fully integrating by the holiday season. This strategic move comes as Klarna prepares for a highly anticipated public listing in the U.S. Meanwhile, Walmart and Sam’s Club have launched their annual "Fight Hunger. Spark Change." campaign, marking 20 years of partnership with Feeding America and contributing over 2 billion meals to Americans in need.

In terms of financial analysis, UBS has adjusted Walmart’s stock price target to $112, maintaining a Buy rating, and noted Walmart’s significant market share gains. TD Cowen increased Walmart’s price target to $115, also retaining a Buy rating, citing Walmart’s growth drivers in grocery, supply chain, and advertising. Conversely, RBC Capital Markets lowered the stock price target to $107, while maintaining an Outperform rating, following Walmart’s fiscal year 2026 guidance, which did not meet high expectations. Despite these adjustments, analysts generally maintain a positive outlook on Walmart’s long-term growth potential. These developments highlight the ongoing strategic and financial activities surrounding Walmart.

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