Shares of Walmart Inc. (WMT) have demonstrated remarkable resilience following the company’s recent stock split, which marked its first in more than two decades. Since reaching a 52-week low of $64.16 in May of last year, Walmart’s stock surged to a high of $105.30 in February, reflecting investor optimism despite ongoing economic volatility.
The company’s stock trajectory, however, has not been without challenges. Economic uncertainties exacerbated by various geopolitical events, including tariff policies introduced during former President Donald Trump’s administration, have led to price increases for a range of consumer goods. As one of the largest retailers in the U.S., Walmart found itself in a precarious position by passing on some of these tariff-related costs to consumers, a move that drew criticism from the former president himself. In response to the pressures stemming from tariffs, CEO Doug McMillon emphasized the company’s commitment to maintaining low prices, stating, “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs… we aren’t able to absorb all the pressure given the reality of narrow retail margins.”
Despite the current murky economic landscape, Walmart’s long-term investment potential remains robust. Analysts cite several key drivers that could bolster the retail giant’s performance over the coming years.
A cornerstone of Walmart’s growth strategy is its expanding e-commerce division. Already positioned as the largest retailer globally by revenue, Walmart reported sales of $165.6 billion during its fiscal first quarter ended April 30, which marked a 2.5% increase year-over-year. Particularly noteworthy is the performance of its online sales, which surged by 22% in the same fiscal quarter, outpacing the 16% increase recorded in the previous quarter. This growth can be partially attributed to the successful implementation of Walmart Plus, the company’s subscription service designed to offer free delivery and other benefits, aiming to compete with Amazon’s Prime membership. McMillon highlighted the significant impact of these developments, noting, “It’s helpful that we’re crossing the threshold of profitability with e-commerce globally, and that we have these newer, higher-margin businesses growing like membership and advertising.”
Moreover, Walmart is enhancing its revenue diversification through its advertising business, which experienced an impressive year-over-year sales increase of 50% in the first quarter. This surge can be linked to Walmart’s recent investments in connected TV (CTV) advertising, wherein the company can deliver advertisements to consumers on their televisions. The acquisition of television manufacturer Vizio late last year has been pivotal in expanding Walmart’s advertising platform into the CTV market. Forecasts predict that the overall television advertisement sector will grow from $91 billion in 2024 to $98 billion by 2027, with CTV driving significant portions of that growth. As McMillon stated, “This acquisition accelerates the build-out of our advertising platform into the connected TV business.” Given the high profit margins inherent in advertising, this segment provides additional financial flexibility that Walmart can leverage to offset the implications of tariff costs.
Walmart’s capacity for generating free cash flow (FCF) underscores its financial solidity and ability to reward investors. Over the past three fiscal years, the company has produced more than $10 billion in FCF. Its most recent SEC Form 10-K highlighted an optimistic outlook for return on capital improvements. The beginning of its 2026 fiscal year was marked by $0.4 billion in FCF, a substantial rebound from a negative $0.4 billion in the previous year. This robust free cash flow position has enabled Walmart to raise its dividend by 13% as of February, surpassing the 9% increase from the previous year and reflecting the company’s commitment to shareholder value. The retailer has maintained an impressive streak of dividend raises for 52 consecutive years, demonstrating consistent operational strength.
Additionally, Walmart has undertaken significant share repurchase initiatives, spending $4.6 billion in the first quarter alone—the largest buyback in the last year. Such actions not only speak to the company’s confidence in its financial health but also reinforce its strategy to enhance shareholder returns through active capital management.
The question now arises for investors: Is this an opportune time to acquire Walmart shares? A comparative analysis of Walmart’s forward price-to-earnings (P/E) ratio against other retail giants, such as Amazon and Costco Wholesale, sheds light on the current valuation landscape. Although Walmart’s stock exhibits a more attractive price compared to Costco’s, it is relatively aligned with Amazon’s pricing, diverging from the more favorable valuations seen a year ago. Investors may consider employing strategies such as dollar-cost averaging to gradually build their holdings in Walmart stock, even amidst fluctuating market conditions.
Looking ahead, although the macroeconomic environment presents immediate challenges, many analysts believe that conditions will eventually improve. With its strategic maneuvering in e-commerce, advertising, and effective cash flow management, Walmart is poised to capitalize on any recovery, making it a compelling long-term investment opportunity.
As these dynamics unfold, the market will closely scrutinize Walmart’s ability to navigate economic headwinds and maintain its status as a retail powerhouse. The retail sector stands at a crossroads, and Walmart’s next steps could serve as a bellwether for broader industry trends and consumer behavior, thereby shaping the future of retail investment strategies.