Wal-Mart (WMT) shares plummet 10%: Why Wall Street sees it as a buying opportunity

Disclaimer: Content does not constitute investment advice. Trading involves risks—please invest with caution!

Core Points

Wall Street maintains an optimistic stance

The business segment continues to expand

Access to 3 free stock e-books

Wal-Mart's share price has corrected sharply, and Wall Street analysts maintain optimistic expectations

August 20, Walmart's shares plunged nearly 10%, the biggest one-day drop in nearly five years, after releasing second-quarter earnings. U.S. same-store sales growth slowed to 2.6%, down from 4.1% in the previous quarter and the lowest level in recent years.

Despite slowing growth, the retail giant exceeded expectations (actual $0.81 versus expected $0.74) and raised its outlook for the fiscal year 2027. BTIG Research maintains its "Buy" rating with a price target of $140, implying approximately 32% upside potential from the current level of $105.83. The Wall Street consensus rating is "moderate buy", with an average price target of $131.88 among 39 coverage analysts.

Wal-Mart (WMT) shares opened at $105.83 on Thursday, still more than 7% below their closing price on the day before the August 20 quarterly report. The nearly 10% one-day plunge represented the retailer's biggest decline in about five years. Walmart Inc., The sharp decline in WMT

was mainly due to a slowdown in comparable sales momentum. U.S. same-store sales recorded 2.6%, down from 4.1% in the previous quarter and 4.6% in the same period last year. This is the weakest performance in years and comes at a time when market participants are increasingly concerned about consumer purchasing power.

However, revenue data paints a more positive picture. Wal-Mart's earnings per share reached $0.81, exceeding the consensus market expectation of $0.74. Total revenue reached US$187.94 billion, a year-on-year increase of 5.9%, higher than the expected US$186.64 billion. Management also improved its forecasts for revenue, operating profit and profitability for fiscal year 2027.

According to Gimme Credit analyst Carol Levenson, if these results are viewed independently of market reactions, people are likely to expect a positive response from stock prices.

Energy costs continue to pose a challenge. Rising oil prices not only put pressure on Wal-Mart's low-income customers, but also increased the company's operating costs. In addition, third-quarter guidance failed to meet market expectations, exacerbating short-term concerns.

High fuel prices and geopolitical tensions involving Iran are key factors that analysts have monitored that could become future headwinds for the stock.

Wall Street remains optimistic

Analysts 'confidence remains solid despite the sell-off after the earnings report. BTIG Research reiterated its "buy" rating on Wal-Mart on Thursday with a price target of $140, implying about 32% appreciation potential from current levels. Tigress Financial set a more aggressive price target of $155.

Michael Baker of D.A. Davidson is positive about Wal-Mart's strategy of using tariff refunds to cut prices, believing it to be a catalyst to expand market share. His target price is $132. Citigroup lowered its price target to $132 from $147, but maintained a "buy" stance. Sanford C. Bernstein confirmed its "outperform" rating.

Of the 39 analysts tracking the stock, 35 give it a strong buy or buy rating and 4 recommend hold. The consensus target price averaged $131.88.

Stock prices currently trade at a P/E ratio of less than 33 times forward earnings, compared with a five-year historical average of 35 times. Jefferies analyst Corey Tarlowe pointed out that "most of the downside risks to the revision of earnings per share have been absorbed" and the consensus forecast earnings per share for fiscal 2028 is $3.23.

Business segment continues to expand

In addition to its traditional retail business, Wal-Mart's complementary business units are attracting investor interest. Walmart+ subscription revenue and advertising platform both performed strongly in the second quarter, with Neuberger Berman's John San Marco describing these results as "as exciting" as previous periods. Currently, Wal-Mart's transaction valuation is at a discount to Costco, a shift from a historical situation where two retailers have enjoyed similar multiples.

Regarding insider trading, Executive Vice President Daniel Bartlett sold 3,950 shares on September 1 for $105.14 through a predetermined 10b5 -1 plan. Executive Vice President Christopher Nicholas sold 2,900 shares on August 20 for $106.34, also under the 10b5 -1 plan.

WMT has a 52-week trading range of $98.88 to $135.16, with a 50-day moving average of $110.45 and a 200-day moving average of $119.08.