Oppenheimer downgraded Walmart shares from Outperform to Perform and removed its previous $140 price target. The investment firm said the stock’s short-term risk-reward profile had become less attractive ahead of Walmart’s August 20 earnings report.
Walmart shares fell approximately 1.4% in U.S. premarket trading following the downgrade.
Analysts Highlight Three Near-Term Risks
Analysts led by Rupesh Parikh identified three main concerns behind the rating change.
First, Walmart could face pharmacy-related pressure on its U.S. comparable sales because of changes linked to the Inflation Reduction Act.
Second, analysts believe the stock’s valuation remains elevated. This could leave Walmart shares vulnerable to a lower valuation multiple if comparable sales growth begins to slow.
Third, current Wall Street forecasts are already above Walmart management’s longer-term growth guidance, increasing the risk of disappointment.
Walmart Sales Forecast Trails Wall Street Estimates
Oppenheimer expects Walmart U.S. comparable sales to rise by 3% during the second quarter. This forecast is below the broader Wall Street estimate of 3.8%.
The firm expects grocery sales to remain strong. However, slower growth in general merchandise and the health and wellness division could offset some of that strength.
Walmart Stock Underperforms the S&P 500
Walmart shares have fallen approximately 1% year to date, while the S&P 500 has gained around 11%.
This marks a significant reversal from previous years. Walmart stock surged 72% in 2024 and gained another 23% in 2025, outperforming the wider market during both periods.
The retailer currently trades at around 36 times expected earnings over the next 12 months. That remains well above its historical average of approximately 23 times earnings.
However, the valuation has declined from a record multiple of about 44 times earnings reached in April.
Pharmacy Headwinds Could Pressure Walmart Shares
Oppenheimer acknowledged that many investors are already expecting Walmart’s U.S. comparable sales to fall short of market forecasts.
Even so, analysts warned that the shares could decline further when the company releases its earnings report. Walmart’s elevated valuation and continuing pharmacy-related challenges could remain a concern through at least the fourth quarter of fiscal 2026.
Long-Term Walmart Outlook Remains Positive
Despite moving to a more cautious rating, Oppenheimer did not change its medium-term earnings forecasts.
The firm also said that slower pharmacy growth caused by a shift from branded to generic medicines is unlikely to significantly damage Walmart’s overall profitability.
Analysts remain confident in the company’s longer-term prospects, even though they currently prefer to remain on the sidelines.
Advertising, Membership and AI Support Growth
Oppenheimer highlighted several factors that could support Walmart over the coming years.
These include continued market share gains, stronger advertising revenue, membership growth and improving profitability within the company’s e-commerce operations.
The analysts also expect Walmart to benefit from its investments in artificial intelligence. In addition, they expressed confidence in the leadership of President and CEO John Furner.
Analysts See Possible Support Near the Low $90s
Oppenheimer’s base-case forecast assumes Walmart will generate earnings of $3.10 per share in fiscal 2027, which ends in January 2028.
The firm believes the stock could potentially find a near-term bottom between the low $90s and low $100s.
However, analysts noted that even within this range, Walmart would continue to trade at a substantial premium to its historical valuation. They believe this premium reflects the company’s improved growth outlook and expanding revenue opportunities.
