Walmart Stock Downgraded by Oppenheimer on Near-Term Headwinds

Oppenheimer downgraded shares of Walmart Inc. (WMT) to Perform from a previous Outperform rating, citing a challenging short-term outlook for the retail giant. The firm also removed its $140 price target on the stock, which fell 1.4% in premarket trading following the analyst note released Monday.

Rationale for the Downgrade

Analysts at Oppenheimer, led by Rupesh Parikh, outlined three primary factors for the less compelling near-term case ahead of Walmart's August 20 earnings release. The firm is concerned about potential pharmacy-related headwinds to U.S. comparable sales stemming from the Inflation Reduction Act.

Oppenheimer also pointed to a valuation it described as "peakish," which could make the stock vulnerable to a lower re-rating if sales growth slows. Finally, the analysts noted that current Wall Street forecasts already sit above the company's own longer-term guidance, creating a high bar for performance.

Market Context and Expectations

Reflecting these concerns, Oppenheimer now models a 3% comparable sales increase for Walmart U.S. in the second quarter, below the consensus Street estimate of 3.8%. The firm expects continued strength in the grocery segment to be offset by moderating growth in general merchandise and health and wellness categories.

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Walmart's stock is down 1% year-to-date, significantly underperforming the S&P 500's 11% gain. This marks a sharp reversal from 2024 and 2025, when the stock heavily outperformed the index. According to Oppenheimer, Walmart currently trades at approximately 36 times next-twelve-months earnings estimates, well above its historical average of near 23 times.

Long-Term Outlook Remains Favorable

Despite the downgrade, Oppenheimer stressed that its intermediate-term earnings forecasts are unchanged and that it remains "very upbeat" on Walmart’s longer-term prospects. The firm does not expect the anticipated slowdown in pharmacy growth to impact the company's overall profitability.

Oppenheimer's long-term confidence is based on several factors, including:

• Continued market share gains
• Growth in alternative revenue streams like advertising and memberships
• Improving e-commerce profitability
• Benefits from investments in artificial intelligence