Walmart stock price target reset by JPMorgan after earnings

Walmart just handed Wall Street a mixed bag.

Despite rising revenue and profits, shares of the big-box retailer fell more than 9%, following its recent quarterly results.

Soon after, JPMorgan adjusted its stock price target for Walmart (WMT).

Walmart stock price target drops to $125

At the time of writing, WMT stock trades around $104. Valued at a market cap of $825 billion, Walmart has returned more than 400% to shareholders over the past decade, after adjusting for dividend reinvestments.

The stock’s decade-long outperformance has meant it trades at 35x forward earnings, which is steep for a company projected to grow earnings at a compounded annual rate of 8.7% over the next five years.

By comparison, Walmart’s 10-year average P/E multiple is much lower at 25x.

According to Investing.com:

JPMorgan lowered its price target on Walmart to $125 from $137, while maintaining its “Overweight” rating on the blue-chip stock.
JPMorgan had already cut its same-store sales estimate for Walmart three weeks before earnings. When the actual number landed, it came in below the lowered projection.
The analyst described the setup heading into results as a “hairball,” a messy tangle of moving pieces that made the stock hard to call.

Why Walmart stock is under pressure

Walmart’s health and wellness business has weighed on revenue and margins in fiscal Q2 of 2027 (ended in July).

Walmart’s chief financial officer, John David Rainey, told analysts on the company’s second-quarter fiscal 2027 earnings call that new maximum fair pricing regulation impacted total comparable sales by 125 basis points in the quarter, worse than the 100 basis point hit the company had planned for entering the year.

Walmart U.S. comparable sales came in at 2.6% for the quarter. Strip out health and wellness, and that number looks a lot healthier, closer to the 3% to 4% range the company has posted consistently over the past two and a half years.

CEO John Furner called it a good quarter overall, with sales growth at the top end of guidance and adjusted operating income up 17.4% in constant currency.

Furner said the pharmacy headwind masked otherwise strong performance across grocery, general merchandise and e-commerce.

John Furner, CEO, Walmart, expects new revenue streams to drive growth

Paul Morigi/Getty Images

Walmart C-suite looks beyond pharmacy drag

JPMorgan’s keeping an outperform rating while cutting its short term price target rests on a simple idea. Walmart has more ways to make money than it used to, and those newer businesses are growing fast enough to offset the pharmacy drag.

Global advertising revenue jumped 38% in the quarter
Marketplace sales in the U.S. climbed 52%.
Membership income grew nearly 17% worldwide, and
Walmart Plus posted its best first-half membership growth in the program’s history.

Rainey told analysts that almost half of Walmart’s profit growth in the quarter came from areas like membership, advertising and marketplace, not the core retail business.

He also said e-commerce advertising is now growing faster than e-commerce sales overall, pushing incremental margins higher.

Furner stated:

“The mix of eCommerce for Walmart International is now 30%, with strong growth again this quarter in China, India and Canada. Growth in Q2 was 19%. Sam’s Club U.S. grew eCommerce 26%, with delivery from Club up triple digits following the launch of our 1-hour delivery back in April.”

Moreover, Furner pointed to price investments as a driver of future growth.

Walmart ran more than 11,000 rollbacks during the quarter, up from 7,200 at the end of the first quarter.

More Walmart:

He said those cuts tend to boost unit volume first, with market share gains following over the next few months.

The investment bank noted that the bearish case on Walmart assumes there’s no lagging benefit from these price cuts, meaning bears expect the rollbacks to cost Walmart money without ever paying off in higher traffic or share gains.

Furner’s comments suggest management sees it differently, and the company’s food-category share numbers this quarter, which Furner called among the strongest in some time, appear to support that.

What next for Walmart stock price

JPMorgan isn’t alone in trimming its number. The investing.com report states:

BMO Capital cut its target to $126, pointing to the same comparable sales slowdown and health and wellness weakness.
TD Cowen lowered its WMT stock price target to $125, also citing the 2.6% comp figure.
Bernstein held its Outperform rating and pointed to Walmart’s strong margins as a reason for confidence.

Out of the 32 analysts covering Walmart stock, 29 recommend “Buy”, and three recommend “Hold”. The average WMT stock price target is $130, indicating an upside potential of 25% from current levels.

Notably, JPMorgan’s takeaway is that the selloff has run its course.

The firm expects Walmart’s trends to improve as advertising, marketplace and membership keep scaling, giving the stock a path forward even with a lower price target attached.