Bernstein believes Walmart price-investment concerns are overdone, and margin improvement across channels supports upside

Overview

This report focuses on Walmart Inc’s value debate on two themes: price investment and omnichannel profitability. Bernstein argues that margin concerns amplified by the Kroger announcement, Trump’s Truth Social post, and Walmart’s own price rollback communication are overstated; Walmart’s price investment is not a new development, and the company continues to gain share in U.S. groceries and membership-based retail clubs. Over the medium to long term, the report attributes Walmart US margin improvement mainly to better e-commerce fulfillment and delivery efficiency, 3P marketplace growth, Walmart Connect retail media expansion, and Walmart+ membership revenue growth.

Core views

The core view is fourfold: first, Walmart can continue to invest in price while widening price advantage versus peers, using tariff reimbursements and fuel/ freight-pressure relief to offset part of the cost impact and avoid materially hurting profit. Second, Walmart US core e-commerce is still loss-making, but automation, dark stores, higher delivery density, and route optimization can improve unit economics. Third, retail media and membership are high-margin substitute revenue streams with operating leverage that can scale as e-commerce GMV and user penetration rise. Fourth, if these paths are achieved, Walmart US EBIT margin can expand by about 200 bps from FY26 to FY30 and reach 7%, making current valuation look less expensive than it appears.

Analysis framework

The report uses a segmental margin bridge and scenario-analysis framework, breaking Walmart US into physical stores, core e-commerce, retail media, and membership, and estimating each segment’s contribution to EBIT margin. Short-term price investment analysis focuses on price leadership, rollback history, market-share changes, tariff rebates, and freight inflation; long-term profitability analysis is based on e-commerce penetration, GMV growth, 1P/3P mix, retail-media revenue as a share of GMV, membership revenue growth, and fulfillment and delivery cost improvements.

Methodology notes

• Valuation methodsP/E target price method

  Derive the target price using forward Q5-Q8 EPS and a target P/E multiple

  The report discloses that applying 39.0x P/E to forward Q5-Q8 EPS of 3.71 USD yields a 145 USD target price for WMT.

• Margin analysisEBIT margin bridge

  Decompose the sources of Walmart US margin expansion from FY26 to FY30

  The report bridges the effects of core e-commerce loss reduction, retail media, membership, and ecommerce growth itself on margins, and derives a path to Walmart US EBIT margin reaching 7% by FY2030.

• Scenario analysisE-commerce growth and core e-commerce margin scenarios

  Examine the impact of e-commerce CAGR and unsubsidized core e-commerce EBIT margin on FY30 margin

  The report assumes FY26-FY30 core e-commerce net sales CAGR of about 15%, with core e-commerce reaching about 1% unsubsidized EBIT margin, and evaluates the resulting margin upside.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WMT.US

  Core coverage name

  Strengths

  Price leadership, increased U.S. grocery share, Sam's Club share gains, e-commerce GMV expansion, high-margin retail media and membership revenue streams, and improving fulfillment and delivery efficiency through automation.

  Weaknesses

  Core e-commerce remains loss-making on an unsubsidized FY26 basis, forward P/E appears elevated on a headline basis, and price investment plus cost volatility may pressure short-term margins.

  Comparison

  The report compares Walmart’s retail media with Amazon advertising, noting Walmart is not likely to close the gap in the near term, but could improve ad appeal through Walmart Marketplace, Walmart Connect, and Vizio; it also references peers Kroger, Costco, Target, and Amazon in sector comparison context.

  Risks

  If new businesses like e-commerce and advertising do not materialize, if regulatory scrutiny increases, if price investment exceeds what tariff rebates and cost relief can offset, or if consumer conditions weaken.

Key data

• RatingOutperformBernstein's investment rating on Walmart.
• Target price145.00 USDBased on 39.0x P/E and forward Q5-Q8 EPS of 3.71 USD.
• Current price114.78 USDThe report table date is listed as 2026-07-13.
• FY26 adjusted EPS2.64 USDFrom the report’s front-page financial summary.
• FY27E adjusted EPS3.09 USDFrom the report’s front-page financial summary.
• FY28E adjusted EPS3.60 USDFrom the report’s front-page financial summary.
• FY26 revenue706,413 million USDFrom the report’s front-page financial summary.
• FY26 to FY28 revenue CAGR5.7%From the report’s front-page financial summary.
• Estimated Walmart US core e-commerce FY26 EBIT margin-6%Fully loaded, unsubsidized basis, excluding retail media and membership contributions.
• Walmart US e-commerce share of sales FY30 target pathabout 30%The report assumes FY26 to FY30 e-commerce growth CAGR of about 15%.
• Walmart US e-commerce GMVabout 115 billion USD to 225 billion USDThe report expects a near doubling over the next four years driven by 3P growth.
• Retail media revenue pathabout 4.0 billion USD to 11.0 billion USDThe report assumes the revenue share of GMV rises from about 4% to about 5%.
• Retail media margin contributionabout 75 bpsPotential contribution to Walmart US EBIT margin expansion.
• Core e-commerce margin improvement contributionabout 100 bpsPotential contribution to Walmart US EBIT margin expansion.
• Walmart+ membership EBIT marginabout 80%The report expects membership revenue to grow with e-commerce net sales.
• Membership revenue pathabout 1.65 billion USD to 2.9 billion USDThe report expects a potential contribution of about 11 bps to consolidated EBIT margin.
• Walmart US FY30 EBIT margin path7%Driven by core e-commerce efficiency, retail media, and membership.
• Present-value EPS upside1.25 USDThe report states approximately 1.25 USD of PV upside over the next four years.
• Mature-stage earnings power P/Eabout 27xNTM-consistent expectations after adding back EPS upside, below roughly 29x long-term historical average.

Impact & implications

If the report’s margin path proves valid, Walmart’s investment narrative is likely to shift from short-term pressure from price competition to omnichannel platform profitability expansion. The near-term stock pullback from price investment is framed as a potentially more attractive buying opportunity, rather than a signal of structural margin deterioration. For investors, the key is whether Walmart can convert e-commerce scale, 3P marketplace, retail media, and membership into sustainable EBIT margin expansion.

Risks

• Walmart may fail to succeed in new lines such as e-commerce and advertising, jeopardizing long-term revenue and margin goals.
• Walmart’s leadership in the U.S. grocery market may lead to heightened regulatory scrutiny.
• If the scale of price investments exceeds the degree offset by tariff refunds and freight pressure relief, short-term margins may come under pressure.
• An unexpectedly weakening consumer environment could affect comparable-store sales and operating leverage.
• If automation in e-commerce fulfillment, higher delivery density, dark-store networks, and route optimization do not progress as expected, the path to profitability for core e-commerce could be delayed.
• If retail media revenue’s share of GMV cannot rise from about 4% to about 5%, margin expansion from this source may be lower than the report’s estimate.

What to watch

• Whether Walmart’s price rollback activity continues to expand and whether the price gap versus competitors continues to widen.
• Whether actual tariff rebate amounts are close to the report’s cited level of less than 50 bps of U.S. net sales, about 3.0 billion USD, and whether they are sufficient to support price investment.
• Whether fuel and freight costs continue to ease the roughly 1.0 billion USD annual cost pressure cited in Q1.
• Whether Walmart US e-commerce penetration moves toward about 30% by FY30 and whether e-commerce net sales achieve about 15% CAGR.
• Whether the share of 3P marketplace in Walmart US e-commerce GMV rises to about 30%, pushing GMV from about 115 billion USD toward 225 billion USD.
• Whether unsubsidized EBIT margin for core e-commerce improves from -6% in FY26 and approaches the FY30 turnaround target.
• Whether Walmart Connect, Vizio, and Vibe.co integration lifts retail media revenue as a share of GMV from about 4% to about 5%.
• Whether Walmart+ membership revenue grows from about 1.65 billion USD to 2.9 billion USD with e-commerce growth while maintaining around 80% EBIT margin.