DA Davidson cuts Walmart stock price target on comp weakness

DA Davidson has reduced its price target on Walmart Inc. (NYSE:WMT) stock from $150 to $132, while keeping the stock rating at Buy. This adjustment was due to slower U.S. comparable sales in the first quarter, attributed to low-end weakness resulting from higher gas prices. The company also experienced pharmacy deflation on a year-over-year basis, although this issue was already known and not much different from the first quarter's situation.

Walmart made an effort to reinvest tariff refunds into pricing at the end of the second quarter, which could lead to better third-quarter comparable sales and long-term share gains, according to DA Davidson. The firm pointed out that alternative business segments, such as media, marketplace, and membership, have consistently shown strong growth.

Walmart's stock has contracted 14 times from its peak, with a current P/E ratio of 36.3, eight times lower than Costco's valuation. The stock's current price appears to be overvalued based on the firm's Fair Value estimate. Despite the recent comparable sales miss, DA Davidson is considering buying the dip. The new price target of $132 is based on a revised 2027 earnings per share estimate of $3.15, which is now 42.0 times the stock price.

In a related development, Walmart reported its fiscal second-quarter results, exceeding Wall Street's expectations with adjusted earnings of $0.81 per share on revenue of $187.9 billion, surpassing forecasts of $0.74 per share and $186.75 billion in revenue. Nevertheless, the market's response was negative, with concerns over the quality of earnings and ongoing reinvestments in pricing.

Several other analysts, including Goldman Sachs, Guggenheim, and BofA Securities, also lowered their price targets for Walmart, citing factors such as slowing sales growth and premium valuation.