Walmart Inc. (WMT) saw its shares slip 1.1% to $118.91 in Tuesday morning trading, even as the retail giant reported a robust first-quarter performance that included record sign-ups for its Walmart+ membership program. The company's global e-commerce sales surged 26%, contributing to an overall revenue increase of 7.3% to $177.8 billion.
Mixed Analyst Reactions
Despite the positive quarterly results, Wall Street analysts remain cautiously optimistic. Evercore ISI and Morgan Stanley both reiterated their $140 price targets and Outperform/Overweight ratings, citing the strength of Walmart's digital ecosystem. Morgan Stanley analysts Simeon Gutman and Pedro Gil highlighted the company's e-commerce "flywheel"—a combination of online sales, advertising, marketplace growth, and membership income—as a key driver. Online sales climbed approximately 25%, Walmart Connect advertising revenue jumped 44%, membership income rose 28%, and marketplace gross merchandise value added around 50% during the quarter.
Bank of America took a slightly different stance, cutting its price target to $144 from $150 while maintaining a Buy rating. The bank reduced its valuation multiple, noting that the consumer backdrop has become more challenging. However, BofA still believes Walmart is well-positioned to capture additional market share as shoppers increasingly seek value, which "should drive a return to a beat/raise cycle assuming the freight environment doesn't worsen." Piper Sandler's Peter Keith raised his target to $137 from $130, keeping an Overweight rating.
Consumer Pressure and Cost Concerns
The cautious tone from analysts reflects broader economic headwinds. The Conference Board's consumer confidence index dropped to 93.1 in May, while U.S. gasoline prices averaged $4.49 per gallon. Approximately two-thirds of consumers surveyed reported that rising prices are forcing them to cut back on spending. Walmart CFO John David Rainey acknowledged the company is not "immune" or "bulletproof" to economic pressures, warning that persistently high costs could lead to "somewhat higher retail price inflation" in the second quarter and beyond.
Fuel costs alone reduced first-quarter operating income by about $175 million, and average fuel purchases at Walmart gas stations fell below 10 gallons for the first time since 2022, according to Reuters. This underscores the strain on lower-income households, which are Walmart's core customer base.
Outlook and Strategic Positioning
For the second quarter, Walmart guided adjusted earnings per share in the range of $0.72 to $0.74, below some analyst estimates. The company maintained its fiscal 2027 targets and expects Q2 net sales growth of 4% to 5% in constant currency. Meanwhile, competitor Target raised its annual sales growth forecast to around 4%, but CEO Michael Fiddelke expressed caution about "swinging too hard too quickly" given weak consumer sentiment. Target is cutting prices on 3,000 products and expanding same-day delivery options to compete with Walmart and Amazon.
Analysts see Walmart as a narrow trade at present, betting that gains in traffic, advertising, membership, and delivery scale can offset higher fuel, healthcare, and fulfillment costs. However, if input costs remain elevated, the $140 price target may hinge less on sales growth and more on Walmart's ability to protect margins without raising prices.
