Walmart Stock Performance and Valuation Concerns for 2025

Walmart's stock surged 71.9% in 2024, raising questions for investors about sustainability into 2025. Concerns about valuation and growth prospects are front and center as the company prepares to release its fiscal results next month.

Date: 24-01-2025

AI Rating: 5

**Stock Performance Overview**
Walmart (NYSE: WMT) experienced impressive growth in 2024, with a notable 71.9% increase, making it the second-best-performing component of the Dow Jones Industrial Average. However, as analysts shift their focus to 2025, there are increasing concerns regarding the sustainability of this momentum given the company's current valuation.

**Earnings Per Share (EPS)**
Walmart has set expectations for earnings per share of $2.48 in fiscal 2025, rising to $2.76 in fiscal 2026. These figures mark a significant improvement from previous earnings but translate to a high price-to-earnings (P/E) ratio based on the stock's current valuation. For instance, a projected EPS of $2.76 corresponds to a P/E ratio of 33.3 with Walmart priced at approximately $92 per share, which investors may view as overpriced.

**Revenue Growth Impact**
Walmart reported record revenue and profits recently, as compared to a challenging period for other discount retailers. This achievement has been a contributing factor to the stock's robust performance. However, with competition and market dynamics in play, sustaining revenue growth amidst potential inflationary pressures poses a risk to future performance.

**Valuation Concerns**
Despite its strong business fundamentals and history as a Dividend King, Walmart’s high P/E ratio calls into question whether it is still a viable investment. The current market predictions suggest that even at ambitious growth levels, Walmart's stock price could take several years to achieve a market cap of $1 trillion.

**Conclusion**
Overall, while Walmart demonstrates strong operational success and solid growth metrics, its substantial price rise and high valuation limits its appeal as an investment opportunity at this moment. Investors may prefer to focus on alternatives that provide better entry points and valuations, especially for those seeking dividend income.

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