Shareholders of America’s largest retailer, Walmart (WMT), are heading into this year’s holiday season with plenty to celebrate. The stock has maintained a steady upward trend through most of 2025 and delivered another strong showing this week, gaining more than 6% following a stellar earnings report released yesterday.
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After trading below $82 per share in April on Liberation Day—amid macro uncertainties and fears around consumer spending—shares have since rallied more than 30%, reclaiming levels near their all-time highs at around $107.
Above all, Walmart has demonstrated over recent quarters—and reaffirmed in its FQ3 earnings—that more selective consumer spending hasn’t derailed its comp-sales trajectory or store traffic. Growth remains very healthy and only minimally influenced by inflation.
Given that Walmart trades at a premium valuation, the company needs to deliver and impress in its guidance to justify that pricing. And that’s exactly what Fiscal Q3 accomplished.
By acknowledging that there are no signs of deterioration in consumer behavior and by reinforcing a consistent growth path in e-commerce, marketplace, and retail media, management essentially removed the biggest risk hanging over the thesis: a potential visible slowdown in the U.S. segment. This clears the way for further multiple expansion and a push toward new all-time highs—leading me to reiterate a Buy rating on WMT.
Quality Comps Point to Durable Growth
In general, much of the narrative around Walmart’s performance centers on its comp-sales trajectory, especially in the U.S., where roughly 60% of revenue comes from grocery, a defensive, recurring category. And in Q3, Walmart delivered 4.5% U.S. comp-sales growth YoY, essentially stable versus the last three quarters.
Looking at the two-year stack, comps actually accelerated by 100 bps versus Q2, meaning Walmart is growing on top of already strong comparisons—which I would argue is a sign of quality, not late-cycle deceleration. An honorable mention here is e-commerce’s contribution to comps, which has increased from 290 bps to 440 bps over the last five quarters, highlighting a structural mix shift that strengthens the bull thesis—especially since these are higher-margin businesses.
Even more important than comp growth alone is the quality of those comps, as reflected in traffic and ticket. Walmart’s transactions grew 1.8% YoY, average ticket rose 2.7%, and like-for-like inflation was just 1.3%. In practical terms, this means more people are coming in, each visit is slightly higher, and inflation played only a modest role.
So, I would say that traffic and comp trends read clearly bullish: comps aren’t rolling over, they’re traffic-led rather than inflation-led, and the acceleration suggests durability, not exhaustion.
Strong Core Margins Despite Temporary Headwinds
When we look at the bottom line, the margin picture might raise some concerns at first glance. Walmart’s GAAP operating margin came in at 3.7% in FQ3—a 38 bps decline QoQ and a 22 bps decline YoY. But that’s not the whole story.
Two major temporary headwinds weighed on Q3 operating income: a large non-cash stock-based compensation (SBC) charge tied to PhonePe’s pre-IPO valuation adjustments, and higher self-insured claims, which tend to be somewhat seasonal. These items pushed GAAP margins down.
But underneath that noise, the core business actually strengthened. The clearest proof is adjusted operating income in constant currency, which grew 8% YoY versus revenue growth of 5.8% in the same period. This reflects an improving marketplace mix, strong double-digit growth in the ad business, 27% e-commerce growth, and continued progress on automation—all pointing to a real operational tailwind.
Last but not least, Walmart’s cash flows were strong even amid a CapEx ramp-up. Operating cash flow increased from $19 billion to $22.9 billion YoY, up nearly 20%, while CapEx rose 14.2% in the quarter. Despite the investment cycle, free cash flow still improved 41.8% YoY to $8.8 billion. Altogether, this validates the thesis of strong earnings conversion paired with high cash-flow quality and healthy working-capital discipline—exactly what you want to see from a massive retailer undergoing a platform transition.
The Case for Walmart’s Higher-Than-Normal Multiple
Perhaps the most vulnerable and debatable point of the thesis is Walmart’s rich valuation. At first glance, the earnings multiples look absurd—Walmart trades at 38x earnings, roughly 50% above its five-year median and more than 160% above the industry average. Still, I would argue there are three key reasons why this premium is justified.
First, Walmart is delivering steady comp-sales growth (+4.5%) at a time when peers like Target (TGT) are posting negative comps (–2.7%), highlighting superior execution and ongoing market-share gains. Second, Walmart is no longer a traditional low-margin retailer. With double-digit growth in its ads (retail media) business, a rapidly expanding 3P marketplace, and strong e-commerce momentum, the company is transitioning into a hybrid model—part retailer, part high-margin platform—which structurally supports a higher multiple.
Lastly, Walmart carries an unusually low perception of risk. The company rarely underperforms and is arguably the safest defensive compounder in retail, with Amazon as its only true competitor. This naturally compresses the discount rate and supports a premium multiple that can be revised higher as execution continues.
Is WMT a Buy, Hold, or Sell?
The bull case for Walmart is pretty much a no-brainer among Wall Street analysts. All 25 analysts covering the stock currently rate it a Buy, reflecting a rare unanimous view. The average price target sits at $120.75, suggesting almost 15% upside from the latest share price.
A Clear Path to New Highs
Walmart has essentially delivered the kind of validation a richly priced stock needs. Traffic and comp sales came in strong, with ticket growth moderately positive—consistent with a “soft-landing” consumer environment. The company’s FQ3 results show that U.S. consumer spending hasn’t collapsed as shoppers are still spending in a healthy way, just prioritizing essentials over discretionary categories. And above all, Walmart continues to capture market share from weaker specialty retail peers.
With solid progress in operating leverage and meaningful traction in higher-margin segments such as e-commerce, marketplace, and advertising, the Walmart bull thesis remains intact and poised for new all-time highs unless proven otherwise. And given how rarely Walmart underperforms, relying on valuation concerns as a reason not to buy in such a favorable setup feels stubborn. In this context, a bullish stance remains warranted.