Walmart Stock Reaches 52-Week High: Time to Capitalize or Wait?

Walmart Inc. WMT continues to tread the growth path, with its shares reaching a 52-week high of $90.95 on Monday, before closing the trading session slightly lower at $89.50. The omnichannel retailer has gained 6.4% in just a week, driven by its stellar third-quarter fiscal 2025 results released on Nov. 19, 2024.The retail giant outperformed expectations in the quarter, delivering robust year-over-year growth in both revenues and earnings while surpassing the Zacks Consensus Estimate on both metrics. Adding to the positive sentiment, management once again raised its fiscal 2025 guidance, signaling sustained operational strength and confidence in its growth trajectory.This strong performance highlights Walmart’s ability to navigate a challenging retail environment while capitalizing on its strategic initiatives. The omnichannel retailer has seen its shares rally 37% in the past six months compared with the industry’s rise of 36.3%. The company’s diversified operations and effective omnichannel strategy has also helped it outpace the Retail – Wholesale sector and the S&P 500’s respective gains of 14.9% and 12.1% in the same frame.WMT Price Performance vs. Industry, S&P 500 & SectorImage Source: Zacks Investment ResearchTechnical indicators also support the stock, which is trading above its 50-day and 200-day moving averages. Trading above these averages signals bullish sentiments.WMT Trades Above 50 and 200-Day Moving AverageImage Source: Zacks Investment ResearchDecoding Walmart’s Q3 ResultsWalmart’s third-quarter fiscal 2025 adjusted earnings of 58 cents per share jumped 13.7% from the year-ago period’s figure of 51 cents. The metric came ahead of the Zacks Consensus Estimate of 53 cents. Total revenues grew 5.5% year over year to $169.6 billion, which beat the consensus mark of $167.5 billion. Revenues were backed by strength across all operating segments. Global e-commerce sales surged 27% on store-fulfilled pickup & delivery and marketplace. E-commerce sales surged 22%, 43% and 26% at Walmart U.S., Walmart International and Sam’s Club U.S. segments, respectively. The company also witnessed a 22% increase in global membership income. Apart from this, WMT’s global advertising business improved 28% year over year.The company’s consolidated gross profit margin expanded 21 basis points (bps) to 24.2%, driven by Walmart U.S. Pricing efforts, enhanced inventory management, better e-commerce margins and the improved business mix (in U.S. and International segments) backed the gross margin expansion.  The company’s operating income increased 8.2% year over year to $6.7 billion due to solid sales growth, a greater gross margin and higher membership income, partly negated by expense deleverage.Catalysts Powering Walmart’s PerformanceWalmart's omnichannel strategy stands as a cornerstone of its growth, enabling customers to shop seamlessly across platforms through services such as curbside pickup, same-day delivery, and in-store order fulfillment. This adaptability not only deepens customer loyalty but also positions Walmart to thrive amid the rising trend of online shopping. Retail big-wigs like Target TGT and Costco COST have also advanced their omnichannel efforts, underscoring the industry-wide importance of this approach.The company’s embrace of automation and AI across its supply chain and customer service operations has significantly enhanced operational efficiency while improving the overall shopping experience. Walmart's focus on high-margin growth avenues—such as advertising, membership programs, and fulfillment services—has further strengthened its financial performance.Walmart’s commitment to its everyday low-price strategy remains a crucial competitive advantage, supported by disciplined inventory management. Strategic price rollbacks on approximately 6,000 items and reductions across grocery and consumables continue to resonate with value-driven customers. On the international front, Walmart’s operations in key markets such as Mexico (Walmex), India (Flipkart and PhonePe), and China are central to its long-term growth ambitions.Walmart Raises FY25 GuidanceWalmart raised its guidance for fiscal 2025. Management expects consolidated net sales growth of 4.8-5.1% (at cc) compared with 3.75-4.75% expected earlier. Adjusted operating income is expected to increase 8.5-9.25% at cc, up from 6.5-8% projected before. Walmart expects adjusted earnings per share (EPS) for fiscal 2025 to be in the $2.42-$2.47 range, up from the prior guidance range of $2.35-$2.43. The guidance suggests growth from the adjusted EPS of $2.22 recorded in fiscal 2024.Reflecting this positive sentiment, the Zacks Consensus Estimate for WMT’s current and next fiscal year EPS has increased in the past seven days. Image Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.Is WMT Stock Overvalued After Its Rally?Walmart’s valuation appears stretched compared to industry peers like The Kroger Co. KR. The company’s forward 12-month price-to-earnings (P/E) ratio is 33.32, exceeding the industry average of 30.82 and marking its highest level in five years. This elevated valuation suggests that investors may be paying a premium for the stock relative to its projected earnings potential. Adding to these concerns, Walmart holds a Value Score of C, which highlights apprehensions about its pricing. The stock's rich valuation raises concerns, especially when weighed against the near-term challenges.Image Source: Zacks Investment ResearchCurrent Challenges Looming Over WalmartWalmart is experiencing margin pressures from shifts in product mix, particularly due to the growth of GLP-1 drug sales in its health and wellness category. While beneficial for revenues, the category creates headwinds for gross profit. On its third-quarter earnings call, Walmart stated that it anticipates a generally steady consumer environment, along with ongoing pressure stemming from its diverse product mix and formats on a global scale. As Walmart scales its digital channels, it faces higher SG&A expenses than traditional brick-and-mortar operations. Incentive pays for frontline associates and marketing investments have further increased costs. Apart from this, persistent inflation in consumables and food categories remains a threat to margins.Adverse currency fluctuations are another concern, which negatively impacted third-quarter reported sales and operating income by 70 basis points and 160 basis points, respectively. With continued pressures anticipated in the fiscal fourth quarter, currency volatility remains a challenge.Investors’ Playbook for WMT StockWalmart’s recent rally to a 52-week high following impressive third-quarter fiscal 2025 results is impressive. This can be attributed to e-commerce expansion, high-margin revenue streams, operational resilience, and international growth. With a focus on innovation and customer-centric solutions, Walmart is well-positioned for long-term success. However, its elevated valuation raises concerns about whether the stock is fairly priced. Challenges such as margin pressures from product mix, inflation, and currency headwinds could impact near-term profitability. Potential investors may consider waiting, while current shareholders may choose to hold their positions. Walmart currently holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks