Oppenheimer believes WMT stock’s “peakish valuation” could be at risk of a re-rating lower if the company’s U.S. comp growth slows.

  • Oppenheimer currently does not have a price target on WMT.
  • Walmart CFO in a May CNBC interview said consumers may feel more strain in the second quarter as the effect of higher tax returns goes away.
  • For Q2, the consensus estimate is $0.74 per share in earnings on revenue of $186.92 billion. 

Oppenheimer on Tuesday downgraded Walmart (WMT) to ‘Perform’ from ‘Outperform’ ahead of the consumer retail giant’s second-quarter earnings report expected later this month, flagging concerns about its pharmacy operations, which could affect its financial metrics. It added that the stock’s premium valuation leaves limited room for upside. 

As of the writing, WMT stock was down nearly 1%.

Oppenheimer’s Takeaway

The firm said it sees a "less compelling outperformance case" for Walmart shares in the near term, according to a report from TheFly. They pointed to headwinds the company’s pharmacy operations face in the U.S., which could drive lower comp sales in the second quarter (Q2) versus consensus estimates.

Oppenheimer believes WMT stock’s “peakish valuation” could be at risk of a re-rating lower if the company’s U.S. comp growth slows to the 2.5%-3.5% range from 4%. Moreover, it highlighted that Wall Street forecasts for Walmart already model "well ahead of longer-term guidance," leaving less room for upside in the shares.

WMT does not have a price target at Oppenheimer. 

Koyfin data suggests that broader analyst sentiment on the company is largely bullish, with 37 of 43 analysts covering the stock rating it a ‘Buy’ or higher. The stock has one ‘Sell’ rating and five ‘Hold’ ratings.

WMT Quick Q1 Recap

For the previous quarter, reported in May, Walmart’s revenue surged 7.3% to $177.8 billion, beating the estimates polled by Fiscal AI, while adjusted earnings per share (EPS) came in at $0.66, matching the estimates. Notably, its operating income took a 250 basis points hit from higher fuel costs in distribution and fulfillment.

While key metrics managed to surpass expectations, Walmart CFO John David Rainey said in a CNBC interview at the time that consumers may feel more strain in the second quarter as the effect of higher tax returns goes away.

“I think higher tax returns muted some of the pressure related to higher fuel prices, and as we’re in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices,” Rainey told CNBC. “It’s something that we’re keeping a close eye on, but that expectation is built into our guidance for the second quarter.”

For Q2, the consensus estimate is $0.74 per share in earnings on revenue of $186.92 billion. Walmart said in May it expects net sales to grow 4% to 5% and adjusted EPS to be between $0.72 and $0.74 for the quarter. It also reaffirmed its fiscal 2027 forecast for adjusted EPS to be between $2.75 and $2.85 and net sales to rise between 3.5% and 4.5%.

On Stocktwits, retail sentiment toward WMT remained in ‘bearish’ territory over the last 24 hours. WMT stock has declined about 1% so far this year, and has lost nearly 9% in value since its last earnings report. 

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