After Earnings, Is Walmart Stock a Buy, a Sell, or Fairly Valued?

Walmart WMT released its fiscal fourth-quarter earnings report on Feb. 19. Here’s Morningstar’s take on Walmart’s earnings and stock.

Key Morningstar Metrics for Walmart

• Fair Value Estimate: $62.00
• Morningstar Rating: ★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Walmart’s Fiscal Q4 Earnings

Walmart’s fourth-quarter results included 5.6% net sales growth and adjusted EPS of $0.74. The firm continues to benefit from widespread demand across income cohorts, while strength in digital and memberships helped lift gross margin by 10 basis points to 24.7%.

Why it matters: Even with consumer wallets stretched, Walmart continues to attract shoppers by emphasizing convenience as much as price. This is evident in its digital offerings, as e-commerce revenue grew 24% globally, driven by omnichannel pickup and delivery.

• Walmart US posted 4.6% comparable sales growth, supported by price-led traffic, resilient grocery demand, and greater use of pickup and delivery. We think its store-fulfilled omnichannel model is widening engagement and value perception, particularly among higher-income households.

The bottom line: We plan to lift our fair value estimate by a high-single-digit percentage, reflecting the time value of money and a modestly stronger medium-term profit outlook. This stems from faster scaling in retail media, which we see as improving wide-moat Walmart’s earnings mix and stability.

• Despite the improved outlook, we view shares as overvalued, with the current price implying operating margins above prior peaks of 6%, which we see as unlikely amid intense competition. We think the market is pricing in outsize gains from discretionary mix and automation initiatives.
• The firm’s high-margin digital revenue streams are rapidly altering the profit algorithm. Global advertising (up 37%) and membership fees now account for over a quarter of EBIT, which we see as enabling greater flexibility to capitalize on Walmart’s e-commerce operations and reinvest in prices.

Coming up: Management struck a conservative tone for the upcoming fiscal year, while guiding to a slower first-quarter profit cadence due to timing of expenses and tariff impacts. Despite this, we think digital investments and price leadership should continue to win value-conscious shoppers.

Fair Value Estimate for Walmart Stock

With its 1-star rating, we believe Walmart’s stock is significantly overvalued compared with our long-term fair value estimate of $62 per share. Recent results were strong, with net sales up 5.8% and Walmart US gross margin expanding 19 basis points to nearly 28%. We view Walmart’s continued traffic gains, even amid strained consumer spending, as evidence of its durable value proposition.

Read more about Walmart’s fair value estimate.

Economic Moat Rating

We assign Walmart a wide moat, grounded in its industry-leading cost structure and stout brand intangible assets. We surmise that these competitive advantages will remain durable, due to Walmart’s unmatched scale, operational discipline, and continuous reinvestment in technology and infrastructure.

These advantages are most evident in the company’s US operations, while Sam’s Club demonstrates more modest but defensible strengths. In contrast, Walmart’s international arm lacks sufficient scale and differentiation in most markets to earn an economic moat, in our view. Quantitatively, Walmart’s consolidated return on invested capital has consistently exceeded our estimate of its weighted average cost of capital (7.3%) with a five-year average return of 12.7%. We believe that as Walmart continues to invest in strengthening its competitive position, its ROIC will remain above its WACC for at least the next two decades.

Read more about Walmart’s economic moat.

Financial Strength

We see Walmart’s financial health as exceptionally durable, anchored by a conservative capital structure and strong free cash flow generation. The firm balances one of the largest revenue bases in the world with a debt profile that is both manageable and deliberately structured to support reinvestment.

Walmart’s debt/EBITDA ratio was a modest 1.4 times at the end of fiscal 2025 (down from an average of 1.7 times over the past 10 years and lower than no-moat peer Target’s 2.3 times level), reflecting a balance sheet tilted toward operating efficiency rather than financial leverage. Financial flexibility is further enhanced by its $9 billion in cash and $15 billion in committed lines of credit, and its $46 billion in debt is mainly due post-fiscal year 2029, limiting refinancing risk.

Coverage metrics underscore its balance sheet heft. The company’s 10-year interest rate coverage ratio has ranged at 13-20 times (averaging 16 times), evidencing that even during periods when margins are pressured, operating income has comfortably serviced obligations. This cushion enables Walmart to withstand competitive intensity without jeopardizing its strategic agenda.

Read more about Walmart’s financial strength.

Risk and Uncertainty

We assign Walmart a Medium Uncertainty Rating, reflecting the stability of its grocery-led business but acknowledging structural risks that could reduce cash flow growth.

The most significant risk to the business stems from competition in general merchandise, where Amazon, Shein, Temu, and other digitally native retailers have been eroding Walmart’s US market share (10.6% compared with 13.6% five years prior). While grocery provides defensive stability (given the consistent purchasing frequency), an increasing reliance on low-margin food sales could weigh on profitability if discretionary categories underperform (with general merchandise sales falling almost 10% since fiscal 2022). Our forecast assumes Walmart defends its low double-digit share in general merchandise and holds its online grocery leadership through further online marketplace penetration; deviation from this path could pressure both revenue growth and margins.

Read more about Walmart’s risk and uncertainty.

WMT Bulls Say

• Walmart Connect is profitably compounding sales at a high-double-digit rate, with 70% operating margins, creating a durable profit stream as it captures retail media advertising spending using real-time data from 255 million weekly shoppers.
• Expansion of private-label penetration boosts margins while reinforcing Walmart’s value message and defending its share.
• Walmart+ adoption drives nearly twice as much shopping frequency per member, reinforcing share gains with fuel, delivery, and media perks appealing to higher-income households.

WMT Bears Say

• Digitally native rivals like Amazon, Shein, and Temu could erode wallet share in discretionary categories, which make up 25% of Walmart’s sales and carry higher margins than grocery.
• Rising employee wages (up 30% in five years) and raw material inflation could outpace productivity gains, constraining margin improvement.
• International operations may fail to scale and realize the same level of brand resonance in the US, with past failures in the UK, Germany, and Argentina, which would depress returns on invested capital.

This article was compiled by Rachel Schlueter.