Walmart (WMT) Defies the Naysayers as it Powers to All-Time Highs

In mid-February, Walmart (WMT) hit all-time highs, riding strong momentum thanks to solid performance in a challenging inflationary environment. The company gained market share, posted robust earnings, and saw impressive digital sales growth. Then came the news of reciprocal tariffs, which knocked the wind out of its sails. Shares dropped fast, falling from around $105 to as low as $83 in just a few weeks. But as the noise faded, the stock began heading north again.

Most recently, Walmart reported its first quarter, during which tariffs started to have a visible impact. That said, it’s not like U.S. consumers suddenly stopped buying essentials—or even discretionary items—just because of some price hikes. While consumer sentiment is still a bit shaky, Walmart kept delivering solid U.S. same-store sales growth.

In my view, even though some bears argue that Walmart looks expensive given its relatively modest growth profile, they are missing the bigger picture. This is a company that consistently generates earnings from its invested capital, and it does so predictably, especially in environments where consumer spending is under pressure. That kind of consistency deserves a premium.

Walmart, based on its recent results and the current momentum, remains a bullish proposition that won’t take long to reclaim its highs.

Why Walmart’s Still the Go-To Retailer

Walmart released its Q1 2025 results on May 15th, and the numbers turned heads. Revenue and earnings both came in strong, despite a slight miss on the top line, with U.S. same-store sales up 4.5%, beating Wall Street expectations.

On a two-year basis, comps are up more than 7.5%, pointing to steady momentum. With 33 straight quarters of positive U.S. comps, Walmart continues to prove why it’s one of the most dependable names in retail. Investors initially liked what they saw—the stock popped about 3% on the news—but it quickly gave back those gains and is now trading roughly flat.

The strength behind these figures can be attributed to a smart category mix and market share gains. Roughly 72% of Walmart’s sales are from consumables—think groceries, household basics, and health products—while only 28% come from discretionary items. That heavy tilt toward everyday essentials is paying off, especially as consumers stay cautious with their spending. It’s a key advantage over peers like Target (TGT), where sales are more evenly split between essentials and non-essentials, leaving them more exposed in today’s environment.

On the earnings call, Walmart’s executives also made it clear they are careful about handling tariffs. Not all cost increases are getting passed straight to consumers—some are being absorbed by Walmart or their suppliers. Despite the media maelstrom, “eating the tariffs” may not be all that bad. Pricing discipline helps WMT stay competitive and drives more foot traffic to stores.

Even with the strong performance, Walmart is playing it safe with guidance. But honestly, that’s not a red flag—it’s a sign of solid risk management. The company is guiding for Q2 net sales growth of 3.5% to 4.5%, and they’ve left their full-year FY2026 outlook unchanged: net sales up 3% to 4% annually, which is a bit of a slowdown from 6% in FY2024 and 5% in FY2025. Still, the company expects adjusted net income to rise between 3.5% and 5.5%, showing healthy, sustainable growth.

High Returns in a Low-Margin Game

There’s one metric I think is especially important when it comes to evaluating Walmart—something the company itself highlights—called Return on Investment (ROI). Walmart defines ROI in a way that’s tailored to the retail business: it’s calculated as operating income plus interest income, depreciation and amortization, and rent expense over the trailing 12 months, divided by invested capital.

Why does this matter? Because Walmart runs on razor-thin margins, squeezing the most out of every dollar it puts into inventory, stores, logistics, and technology is absolutely critical. A strong ROI basically shows how well the company is using its resources to generate solid returns.

In FY2025, Walmart posted an average ROI of 15.1%, and in Q1 of FY2026, that number ticked up to 15.3%—30 basis points higher than the same period last year. But what does that really mean? Well, Walmart’s cost of capital right now is around 7.6%, factoring in the market risk premium and its low beta as a defensive stock. So when your return on investment is basically double your cost of capital, that’s a clear signal that Walmart is creating real value for shareholders.

Paying a Premium for a Proven Performer

And speaking of valuations, it’s clear that Walmart, with its consistently high returns on capital, isn’t—and probably shouldn’t be—a cheap stock. At the moment, anyone going long on WMT is paying about 36.9x forward earnings. That’s below the February peak of 40x but still above the 12-month average of 33x, and well above the 21x lows seen in early 2023.

That doesn’t mean WMT is a bad buy right now—it just means the margin of safety is a bit thinner. Even with a high-quality name like Walmart, investors end up paying a steep premium for consistency and predictability, and that naturally limits the upside.

Walmart will need to keep executing at a high level to justify this kind of valuation—and so far, it’s doing just that. Recent results point to a continuation of firm performance. The setup looks favorable with the stock trading around $96, above both its 50-day and 200-day simple moving averages. Both intermediate and long-term trends suggest there’s still a decent case for buying in, even at these elevated levels.

Is Walmart a Buy, Sell, or Hold?

Most analysts are firmly bullish on Walmart right now. Out of 31 covering the stock, 29 rate it a Buy, with just two calling it a Hold. Not a single analyst is bearish on the stock. WMT’s average stock price target is $109.33, implying 14% upside from the current share price.

See more WMT analyst ratings

Walmart May Not Be Cheap, But It’s Built to Last

Some investors might feel uneasy about Walmart’s valuation, and bears will argue the stock looks expensive given its limited growth potential. While I agree it isn’t cheap, though not necessarily overpriced, it’s tough to find another retailer with Walmart’s consistency in generating solid returns on invested capital. That’s the kind of long-term value creation that tends to win out. With strong recent earnings and bullish momentum, I think it’s just a matter of time before Walmart stock reclaims its all-time highs.