Walmart Stock Drops on Slower Growth Outlook; WAIT Rating Holds

What happened

Walmart’s latest quarterly revenue rose 7% year-over-year, but management projected a full-year growth slowdown due to challenging macroeconomic conditions, sending the stock lower. The company’s FY27 guidance, however, still targets operating income growth of +6% to +8% on sales growth of +3.5% to +4.5%, leaning on higher-margin streams like advertising and membership fees. The DeepValue master report’s WAIT rating, set at $124.30, already embedded skepticism about near-term margin expansion, noting FY26 operating margin compressed to 4.2% from 4.4% due to cost pressures from liability claims and international investments. The post-earnings decline validates the report’s caution, as the market repriced the stock to reflect slower growth without conclusive evidence that the profit mix shift is offsetting cost inflation. With a P/E of 45.2 and EV/EBITDA of 22.5, the stock offers no margin of safety until subsequent quarters confirm operating leverage.

Implication

The stock’s pullback after a soft growth outlook is consistent with the WAIT rating’s premise that at $124 the valuation already baked in a thesis dependent on sustained profit mix improvements. Without a margin of safety, the risk remains that cost headwinds from self-insured claims, tariffs, and international investments persist, preventing operating leverage from materializing. The attractive entry point identified in the master report remains near $115, implying further downside potential of ~8%. Bulls should wait for at least one quarter of FY27 evidence that advertising and membership income continue to grow at pace, while operating expenses as a percentage of sales stabilize. The next 90-day checkpoint – Q1 FY27 results – will be critical; if they miss the guided operating income range, the thesis weakens significantly.

Thesis delta

The post-earnings stock decline reinforces the WAIT rating's caution on near-term margin expansion and valuation, but does not alter the core investment thesis. The key shift is increased urgency for management to prove operating leverage in the upcoming quarters, as the market has already priced in the profit mix narrative without tangible proof. No change to the base-case scenario or entry targets; the stock is less attractive now than at the time of the report's publication due to elevated uncertainty around macro conditions and cost inflation.