Walmart (WMT) Continues to Grow Beyond Retail- Are Investors Noticing This?
Investors gave more weight to its profitability. The company's adjusted operating income went up by 17.4% in constant currency, and its gross margin expanded 96 bps. Walmart Inc. (NASDAQ:WMT) reported $19.7 billion in operating cash flow. However, its FCF fell to $5.5 billion.
On the positive side, the company increased its FY 2027 outlook to 4%-5% sales growth and 7%-8.5% adjusted operating income growth. This means that earnings might continue to grow faster than its revenue.
Bernstein analyst Zhihan Ma kept a "Buy" rating on Walmart Inc. (NASDAQ:WMT)'s stock and a price objective of $142. As per the analyst, the quarter ended at the high end of guidance. The analyst opines that softer US comparable sales were mainly aided by pharmacy-related factors rather than deterioration in the company's core business. Also, the analyst anticipates the combined Q2-Q3 period to result in approximately mid-single-digit sales growth and around 10% EBIT growth.
Notably, such businesses are expected to improve the company's economics as digital scale increases. This can enable earnings to compound faster compared to sales.
Bears believe that the key concern limiting the upside is that the company needs to deliver robust earnings growth despite the deliberate pricing actions, elevated fuel costs, and increased inventory, which rose by 6.7% YoY. Also, the company's guidance for Q3 is for only ~2% - 4% operating-income growth. This is partly because of tariff refunds being redirected toward lower prices.
If sales growth sees softness without the resulting improvement in margins, the broader market might be less willing to pay a premium for the company's defensive growth profile.
Short interest remains low for both companies. As of August 14, approximately 0.79% of Walmart's float was sold short, compared with roughly 0.97% for Amazon. The low figures suggest that neither stock is attracting significant outright bearish positioning.
As per Insider Monkey's database, 99 hedge funds reported owning stakes in Walmart Inc. (NASDAQ:WMT)'s stock at the end of Q1 2026, increasingly modestly to 111 in Q2.
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