Walmart dips after Oppenheimer downgrades shares on difficult short-term setup

Investing.com -- Oppenheimer on Tuesday downgraded Walmart shares to Perform from Outperform on Monday and removed its $140 price target, citing a less compelling near-term case for the stock ahead of the retailer’s August 20 earnings report.

The stock fell 1.4% in U.S. premarket trading by 08:22 ET (12:22 GMT).

Analysts led by Rupesh Parikh pointed to three factors behind the move: potential pharmacy-related headwinds to Walmart’s U.S. comparable sales tied to the Inflation Reduction Act, a valuation they view as "peakish" that could be vulnerable to a lower re-rating if comp growth slows, and Wall Street forecasts that already sit above management’s longer-term guidance.

Oppenheimer now models a 3% comparable sales increase for Walmart U.S. in the second quarter, below the Street’s 3.8% estimate. It expects continued strength in grocery, offset by moderating growth in general merchandise and health and wellness.

Walmart shares are down 1% year to date, underperforming an 11% gain in the S&P 500, a sharp reversal after the stock rose 72% in 2024 and 23% in 2025 against much smaller index gains in both years. The retail giant currently trades at about 36 times next-twelve-months earnings estimates, versus its historical average near 23 times, and down from an all-time high of 44 times reached in April, Oppenheimer noted.

"Although investors in our conversations lately expect a potential Walmart U.S. comp shortfall vs. Street forecasts, we still believe shares could move lower on the print given a still peakish valuation and the potential for pharmacy headwinds to persist at least through Q426," the analysts wrote.

Despite the downgrade, the team said its intermediate-term earnings forecasts are unchanged and it does not expect slower pharmacy growth tied to the brand-to-generic mix shift to hurt Walmart’s overall profit delivery. Oppenheimer also kept a favorable view of the company’s longer-term prospects. "Although we are stepping to the sidelines, we still remain very upbeat on WMT’s longer-term prospects," the analysts said.

They cited continued share gains, growth in alternative revenue streams such as advertising and membership, e-commerce profitability improvements, and benefits from artificial intelligence investment as reasons for that longer-term confidence. The analysts also praised the leadership of President and CEO John Furner.

Oppenheimer’s base case assumes earnings power of $3.10 per share in fiscal 2027, ending January 2028. The firm noted its estimate of a possible near-term bottom for the stock in the low $90s to low $100s range, reflecting what it called a still-significant premium to Walmart’s trading history despite the improved growth profile.

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