Walmart remains resilient under pressure, but valuation caps upside

Overview

This report is Deutsche Bank's 1Q26 earnings commentary and valuation update on Walmart Inc. The title emphasizes that the company remained composed in a pressured environment: although U.S. comparable sales were slightly below some buy-side expectations, fuel costs rose, peer pricing competition intensified, and consumers became more cautious on spending, Walmart still showed business-model resilience through e-commerce growth, marketplace expansion, gross margin improvement, and maintained full-year guidance.

Core views

The core view is neutral. Bullish arguments include: if the MFP impact is removed, U.S. comparable sales may have been stronger; Walmart typically performs well during periods of macro pressure; general merchandise accelerated to mid-single-digit growth and improved the category mix; potential tariff refunds have not yet been included in guidance; and alternative revenue sources such as advertising and commerce solutions increase flexibility to preserve price gaps and manage margins. Bearish arguments include: 1Q U.S. comparable sales still fell short amid stimulus-driven spending; U.S. store comparable sales were negative for a second consecutive quarter; cost pressure from fuel, price investments, wages, and benefits may intensify; food inflation could further squeeze consumer discretionary spending; and valuation remains elevated.

Analysis framework

The report combines earnings review, segment operating metric tracking, earnings forecast updates, and sum-of-the-parts valuation. The analysis focuses on 1Q26 adjusted EPS, Walmart U.S. and Sam's Club same-store sales, transaction volume and average ticket, gross margin, SG&A, EBIT, and the 2Q26, 2026, and 2027 earnings forecasts. The target price is derived by adding a valuation multiple on Walmart's core business EPS and a sales multiple on Flipkart.

Methodology notes

• 估值SOTP

  Sum-of-the-parts valuation

  The $120 target price comes from summing the value of WMT's major assets: the core business is valued at 40x the 2026 EPS of $2.87, and Flipkart is valued at 4.5x sales.

• 业绩分析同店销售与利润率拆解

  SSS, gross-margin, SG&A, and EBIT bridge

  The report assesses operating quality and earnings leverage through Walmart U.S. and Sam's Club same-store sales, transaction volume, average ticket, gross-margin changes, and expense growth.

• 投资评级12个月TSR框架

  Hold rating

  Deutsche Bank's Hold means a neutral view on the stock from a 12-month total-shareholder-return perspective, without a Buy or Sell recommendation.

Asset mapping & comparison

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

• Walmart Inc (WMT.US)

  Research target

  Strengths

  Scale advantage, price competitiveness, 7,200 price cuts, a store network close to customers, 26% e-commerce growth, nearly 50% marketplace growth, and alternative revenue streams that enhance margin flexibility.

  Weaknesses

  1Q U.S. same-store sales were slightly below buy-side expectations, U.S. store comparable sales were negative for two consecutive quarters, and cost pressure from fuel and wages remains.

  Comparison

  The current share price is about 46x 2026 consensus EPS, above the past 12-month average of about 36x; the target-price valuation applies 40x 2026 EPS to the core business, above the one-year average of 36x and the three-year average of 30x.

  Risks

  Slower same-store sales and e-commerce growth, margin compression from price investments, higher SG&A from labor and new-store investments, and food inflation weakening consumers' spending power.

• Flipkart

  Valuation component

  Strengths

  As one of WMT's major assets, it is included in the SOTP valuation and valued at 4.5x sales.

  Weaknesses

  The report provides no operating details for the period.

  Comparison

  The valuation multiple is consistent with the acquisition multiple.

  Risks

  E-commerce competition, growth below expectations, or a lower valuation multiple could reduce SOTP value.

Key data

• Report date2026-05-22The report body shows the date as 22 May 2026.
• RatingHoldRating unchanged.
• Target priceUSD 120.00Target price unchanged.
• Current priceUSD 121.34Price date is 21 May 2026.
• 1Q26 adjusted EPSUSD 0.66Deutsche Bank forecast $0.67, market expectation $0.66, guidance range $0.63-$0.65.
• 1Q26 Walmart U.S. comparable sales+4.1%Deutsche Bank forecast +4.5%, market expectation +4.0%.
• 1Q26 Sam's Club comparable sales+3.9%Deutsche Bank forecast +4.0%, market expectation +3.6%.
• Walmart U.S. e-commerce growth+26%Two-year growth was +47%, contributing 530 bps to comparable sales.
• Marketplace growthAbout +50%The report says marketplace accelerated to about +50%.
• U.S. gross margin change+29 bpsDriven by inventory management, digital-advertising growth, and improved category mix.
• 2Q26 adjusted EPS forecastUSD 0.74Forecast unchanged; market expectation $0.75, guidance $0.72-$0.74.
• 2026 adjusted EPS forecastUSD 2.87Forecast unchanged; market expectation $2.92, guidance $2.75-$2.85.
• 2027 adjusted EPS forecastUSD 3.17Forecast unchanged; market expectation $3.30.
• Valuation multiples40x 2026 EPS; share price at about 46x 2026 consensus EPSTarget price uses 40x core-business EPS; the report says the current share price trades at about 46x 2026 consensus EPS, above the TTM average of 36x.

Impact & implications

The investment implication is that the company's fundamentals are resilient, but the risk/reward is not compelling enough. On the operating side, Walmart offsets fuel and consumption pressure through price investments, store network, omnichannel capabilities, e-commerce, and advertising, and keeping full-year guidance shows strong execution. On the market side, the current elevated valuation limits the room for good news to be reflected in the stock. Unless same-store sales, e-commerce growth, or operating profit expansion come in further above expectations, a neutral rating is more consistent with the report's judgment.

Risks

• Consumers are becoming more cautious, and food inflation may further weaken non-discretionary spending power.
• Cost pressure from fuel, price investments, wages, and benefits may intensify.
• Competitive pricing across peers could weigh on margins and upside.
• U.S. store comparable sales were negative for a second consecutive quarter; if the trend continues, it will erode growth quality.
• If same-store sales and e-commerce growth slow, target-price support will weaken.
• With valuation at a high level, the stock may come under pressure if earnings expectations or market risk appetite are revised lower.

What to watch

• Margin performance under about $250 million of fuel-cost headwinds in 2Q26.
• Whether Walmart U.S. same-store sales can move back toward the buy-side's higher expectations.
• Whether 26% e-commerce growth and nearly 50% marketplace growth can continue.
• Whether general merchandise continues mid-single-digit growth and improves the category mix.
• Whether the 7,200 price cuts and potential tariff refunds create additional room for price investment.
• Whether the 2026 adjusted EPS guidance of $2.75-$2.85 is achieved relative to Deutsche Bank's $2.87 forecast.
• Whether the valuation multiple continues to trade at a premium to historical averages.