Oppenheimer on Tuesday downgraded Walmart shares to Perform from Outperform on Monday and removed its $140 price target, saying the near-term setup for the stock is less compelling as investors approach the company's August 20 earnings report.
The stock fell 1.4% in U.S. premarket trading by 08:22 ET (12:22 GMT).
Analysts led by Rupesh Parikh laid out three primary concerns driving the move. First, they flagged potential pharmacy-related headwinds to Walmart's U.S. comparable sales that are tied to the Inflation Reduction Act. Second, they said Walmart's valuation looks "peakish" and could be vulnerable to a lower re-rating if comparable sales growth slows. Third, they noted that Wall Street's forecasts are already above management's longer-term guidance.
In its updated modeling, Oppenheimer now assumes a 3% comparable sales increase for Walmart U.S. in the second quarter, below the Street's 3.8% consensus. The firm expects continued strength in grocery to be offset by moderating growth in general merchandise and health and wellness.
The analysts warned that expectations among investors they have spoken with suggest a potential Walmart U.S. comparable-sales shortfall versus Street forecasts, and that the company could still see downside on the print given its current valuation and the potential for pharmacy headwinds to persist. "Although investors in our conversations lately expect a potential Walmart U.S. comp shortfall vs. Street forecasts, we still believe shares could move lower on the print given a still peakish valuation and the potential for pharmacy headwinds to persist at least through Q426," the analysts wrote.
Oppenheimer noted several market context points. Walmart shares are down 1% year to date, trailing an 11% gain in the S&P 500. That marks a sharp reversal after the stock climbed 72% in 2024 and 23% in 2025, years in which Walmart significantly outpaced index returns. The firm also highlighted valuation metrics: Walmart currently trades at roughly 36 times next-twelve-months earnings estimates, compared with a historical average near 23 times, and down from an all-time high of 44 times reached in April.
Despite the downgrade, the analysts left their intermediate-term earnings forecasts unchanged and said they do not expect slower pharmacy growth tied to a shift in brand-to-generic mix to impair Walmart's overall profit delivery. They retained a favorable view on the company's longer-term outlook. "Although we are stepping to the sidelines, we still remain very upbeat on WMT's longer-term prospects," they wrote.
The team pointed to structural growth drivers supporting that longer-term stance: continued share gains, expansion of alternative revenue streams such as advertising and membership, improvements in e-commerce profitability, and potential benefits from investments in artificial intelligence. They also praised the company's leadership under President and CEO John Furner.
Oppenheimer's base case assumes earnings power of $3.10 per share in fiscal 2027, ending January 2028. The firm added that it sees a possible near-term bottom for the stock in the low $90s to low $100s range, a level it described as reflecting a still-significant premium relative to Walmart's historical trading levels despite the retailer's improved growth profile.
Context for markets and logistics
From a market structure and supply-chain perspective, the note underscores how macro policy shifts - in this case policy-linked changes to drug pricing - can feed through to retail comparable sales, and how such revenue mix changes may pressure segment-level growth even when core grocery demand remains healthy. For investors, the combination of a high multiple and above-consensus estimates raises sensitivity to execution risks at the category level.