Buy Walmart stock as price investment fear is "overdone", Bernstein says

Investing.com -- In a note to clients on Tuesday, Bernstein reiterated an Outperform rating on Walmart with a price target of $145, arguing that investor concerns over the company's need for price investments following Kroger's announcement and related headlines are "overdone.”

Analyst Zhihan Ma told investors that Walmart "remains a price leader and price investment is not new," expecting the company to continue gaining market share as it invests in price and widens price gaps versus competitors.

The analyst also pushed back on fears about the margin impact of those investments, noting Walmart is leveraging tariff refunds to fund price cuts and offset freight inflation.

Looking further out, Bernstein said the longer-term debate centers on Walmart's profitability improvement potential through its omni-channel initiatives.

The firm estimated Walmart's U.S. core e-commerce business had a fiscal 2026 EBIT margin of -6% on a fully loaded, unsubsidized basis, but sees "a path to profitability on an unsubsidized basis by FY2030" through automated fulfillment and denser delivery routes.

Bernstein also expects Walmart's U.S. retail media business to grow from 4% of gross merchandise value today to approximately 5%, with revenue rising from about $4 billion to $11 billion, contributing roughly 75 basis points to U.S. EBIT margin.

Combined with e-commerce improvements, Bernstein sees a path to a 7% EBIT margin for Walmart's U.S. segment, implying $1.25 of EPS upside over the next four years. The firm said the recent pullback has created "a more attractive entry point."

You May Also Be Interested In

• Northrop Grumman wins $1.2B Navy contract for E-2D aircraft
• IBM shares rise 3% post-Q2 earnings miss as investors eye prior profit warning
• ServiceNow rallies after Q2 beat, lifts annual outlook on AI demand