Walmart’s Stock Drop: A Buying Opportunity or a Sign of Slower Growth?

Walmart, the retail giant, made headlines recently after its stock fell by 6.7% during the first half of Thursday trading. This drop came on the heels of the company’s strong performance in 2024 and a cautionary note about slower growth in 2025. According to the Wall Street Journal, Walmart’s stock decline was a direct reaction to its earnings report, which, while exceeding expectations, also highlighted potential challenges ahead. The company’s warning about slower growth in the coming year has sparked debates among analysts and investors about whether this dip presents a buying opportunity or if it signals broader economic concerns.

Walmart’s Mixed Fourth-Quarter Report: A Deeper Dive

Walmart’s fourth-quarter report was a mix of strong results and cautious forecasts. The company reported revenue of $180.55 billion, a 3.8% increase from the previous year and slightly above consensus estimates. Adjusted earnings per share came in at 66 cents, surpassing expectations by two cents. However, net income fell 4.4% to $5.25 billion, reflecting the pressures Walmart faces in maintaining profitability amid rising costs and competitive pressures.

Despite these challenges, Walmart’s e-commerce business continued to shine, with U.S. e-commerce sales growing by 20%—marking the 11th consecutive quarter of double-digit gains. The company’s membership programs also performed well, and same-store sales for its U.S. business rose by 4.6%, with Sam’s Club seeing a 6.8% increase in sales excluding fuel. These positive results underscore Walmart’s ability to adapt to changing consumer habits and leverage its everyday low-price strategy to drive growth. However, the company’s forecast for the current fiscal year tells a more cautious story. Walmart expects net sales to grow between 3% and 4%, while operating income is projected to increase by 3.5% to 5.5% on a constant currency basis. The adjusted earnings per share estimate of $2.55 is slightly below Wall Street’s expectations, leaving investors to ponder the broader implications of this guidance.

Macroeconomic Policy and Its Impact on Walmart’s Growth

Walmart’s warning about slower growth in 2025 is rooted in macroeconomic uncertainty, particularly the potential for rising tariffs. The company has expressed concerns that increased tariffs on imports from Mexico and Canada could further strain consumer spending, especially on nonessential items. While Walmart has successfully navigated tariff environments in the past, the current geopolitical landscape adds a layer of unpredictability. “We’ve lived in a tariff environment for the last seven or eight years, and we’ll do what we know how to do,” said John David Rainey, Walmart’s Chief Financial Officer. “We’ll work with suppliers. We’ll lean into our private brand. We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”

Rainey also acknowledged that while 66% of Walmart’s products are made in the U.S., the company is not entirely immune to the effects of tariffs. The uncertainty surrounding trade policies, coupled with potential government layoffs and corporate reluctance to invest in an unpredictable environment, could further crimp consumer spending. This cautious outlook has led Walmart to provide what it describes as “prudent guidance” to investors. “We have to acknowledge that we are in an uncertain time and we don’t want to get out over our skis here,” Rainey told the Wall Street Journal. “There’s a lot of the year to play out. Again, we feel good about our ability to navigate the environment, whether it’s tariffs or other macro uncertainty.”

The Path Ahead: Walmart’s Strategy for Growth

Despite the challenges, Walmart remains confident in its strategy. During an investor call on February 20, CEO Doug McMillon emphasized the company’s focus on low prices and convenience. “Our prices are low, and we are becoming more convenient,” McMillon said. “Customers and members are going to be looking for value. They’re going to be looking for convenience.” Walmart’s ability to deliver on these fronts has been a key driver of its success, particularly in its e-commerce and membership programs. The company’s investments in technology and supply chain efficiency have also positioned it well to navigate the evolving retail landscape.

However, the law of large numbers poses a challenge. After several years of strong growth, especially since the onset of the pandemic, maintaining such momentum becomes increasingly difficult. As Fitch Ratings retail analyst David Silverman noted, “It’s just mathematically a challenge to maintain these levels of growth.” This is particularly true in the context of rising tariffs and economic uncertainty, which could further slow consumer spending. Analysts are also keeping a close eye on Walmart’s lower-income customers, who may be more vulnerable to economic pressures. “The question has always been, when does that trend slow down and when does the stress and pressure of its lower-income customers start showing up in results?” said Sheraz Mian of Zacks Investment Research.

Where Will Walmart Stock Go Next?

The debate among analysts about Walmart’s stock is divided. While some see the recent dip as a buying opportunity, others are more cautious. Based on 25 Wall Street analysts’ 12-month price targets, Walmart’s stock could rise 14.8% to reach the average target of $111.83, according to TipRanks. This suggests that there is still upside potential for investors willing to take on the risks.

D.A. Davidson analyst Michael Baker remains bullish on Walmart, noting that the company’s business trends are strong and that Walmart has a history of exceeding expectations after guiding low. “We are not overly concerned with the guidance, and to us, the bottom line is that WMT’s business trends remain strong,” Baker wrote in a research note. This optimism is shared by others who believe that Walmart’s focus on value and convenience will continue to resonate with consumers.

However, others are more cautious. Concerns about tariffs, job losses, and consumer spending weigh heavily on the minds of analysts like Brian Mulberry of Zacks Investment Management. “At the moment, the labor market is still strong,” Mulberry told The Guardian. “But if Walmart’s soft guidance is followed by a decline in jobs, it would be a strong signal that economic growth is slowing.” This scenario could have broader implications for the economy, making it a key factor to watch in the coming months.

Conclusion: Navigating Uncertainty

Walmart’s recent stock drop and mixed earnings report have left investors weighing the potential risks and rewards. While the company’s strong e-commerce performance and everyday low-price strategy position it well for future growth, the macroeconomic landscape poses significant challenges. Tariffs, geopolitical uncertainty, and the potential for slower consumer spending could all impact Walmart’s ability to maintain its momentum.

For investors, the decision to buy or hold Walmart stock hinges on their appetite for risk and their outlook on the broader economy. If Walmart’s strategy continues to resonate with consumers and the company successfully navigates the tariff environment, the recent dip could indeed represent a buying opportunity. On the other hand, if the economic landscape deteriorates, investors may need to reassess their positions.

Ultimately, Walmart’s ability to adapt to changing conditions and deliver value to consumers will be the key to its success in 2025 and beyond. As the retail giant continues to evolve, one thing is certain: its performance will be closely watched by investors and analysts alike.