Did Walmart Trainwreck The Whole Market?

Walmart (NYSE:WMT) tumbled in spite of strong Q4 results that revealed a 5.3% year-over-year sales increase to $182.6 billion and adjusted earnings per share up 10% to $0.66.

It’s confusing at first glance to figure out why the stock fell so sharply because both numbers beat analysts estimates. Where concerns became apparent were on the conference call after the headline numbers had crossed the wires.

So, why did Walmart stock fall? Walmart stock fell following management’s poor guidance for the next year. They announced that the top line growth would slow to 3% to 4% and adjusted earnings is likely to fall to between $2.50 to $2.60 per share. For investors this was enough to hit the sell button because both forecasts fell shy of analysts’ expectations, which were 4% sales growth and $2.76 per share in earnings. 

Worse still, management had a decidedly cautious tone and cited everything from consumer spending to risks around the world, especially as related to tariffs on imports from Mexico to Canada. They said that the tariffs were not factored into the guidance because of uncertainty about their implementation but did say that Walmart would not be “completely immune” to their effects added to investor unease.

That was all it took for the stock to take a nosedive to the tune of 8.8% in premarket trading and closed down 6.5% by the day’s end. The news ricocheted around the market with the Dow, S&P 500 and NASDAQ all tumbling.

Key Points

• Despite strong Q4 results, Walmart’s stock fell due to lower-than-expected 2025 guidance, with slowing sales growth.

• Walmart’s AI, automation, and e-commerce investments strengthen its competitive edge against Amazon.

• Despite the dip, Walmart’s strong prior quarter (5.5% revenue growth, 27% e-commerce surge) and digital transformation suggest continued growth over the long-term.

Up Until Earnings The News Was Good

The stock had been on an upward trajectory prior to the earnings report and had gained a whopping 85% over the prior year, hovering near 52-week highs.

During that period, Walmart had been able to broaden its base and attract high-income consumers despite the prevalent uncertainties.

Through e-commerce investments, Walmart had managed to broaden its market share. E-commerce activities are now competitively compared to Amazon’s scale. Walmart is expected to be able to sustainably grow by allocating further capital to support digital systems and creating new e-shopping opportunities.

Digital modernization across Walmart stores has kept the company at the forefront of global retailers to challenge Amazon and other e-retail giants successfully.

Digital Transformation Has Been a Key Growth Driver

Walmart’s long-term opportunity is rooted in its online platform that has received substantial investment from the company, driving substantial e-commerce sales.

Online pickup and delivery services expansion, together with digital integration in physical stores, contribute to the steady growth of Walmart’s business model.

Technology functions as the core driver behind Walmart’s transformation of its digital strategy and Walmart is exploiting artificial intelligence and robotics to operate its stores and warehouses through automation. One of the big trends expected over the next 5 years is AI-powered robotics and in that vein, Walmart has worked with Symbotic for both online and delivery services.

Management is investing in automated supply chains to boost operational efficiencies and lower costs, and plans to achieve automation service for 65% of its stores and automated processing of 55% of fulfillment center volume by the end of fiscal year 2026.

As of the start of the year, digital twin technology was active for more than 1,700 Walmart stores. If you’re not already familiar with it, the tech allows staff to conduct simulated depictions of substitute store layouts as well as to imagine changes that can be deployed to maximize revenues. It also makes better operations at stores possible while leading to greater interaction with customers.

Walmart top brass has made this a priority for year and made an investment in 2018 to acquire a controlling stake in Flipkart’s business operations, which enabled Walmart to build its presence in worldwide markets while gaining better global market control.

Through Walmart Connect, customers can get specialized advertising solutions via the vast consumer database, which the company provides to brands for targeted marketing purposes. Walmart then earns new revenue streams that support the company in building better supplier and advertiser partnerships.

Walmart Connect should benefit from the recent VIZIO acquisition and SmartCast operating system as it seeks to enable customer service improvements and advertising developments that help advertisers meaningfully connect to customers and drive product discovery.

Walmart carries out its digital transformation through various methods that unite e-commerce system growth with technological developments in addition to strategic acquisitions of suitable businesses to expand its market reach. When you put all these efforts to together, the future is clear, an even wider moat than Walmart already enjoys.

The Prior Quarter Was Really Good

In the prior reported quarter that ended October 31, 2024, Walmart’s consolidated revenue came in at $169.6 billion, increasing by 5.5% from the prior-year quarter, while its net income increased substantially from the year-ago quarter to come in at $4.58 billion. Adjusted EPS came in at $0.58, compared to $0.51 in the prior year quarter, and it surpassed the consensus estimate by 8.8%.

While Walmart’s U.S. comparable sales climbed by 5.3% YoY thanks to a 3.1% rise in customer transactions, international’s net sales saw an 8% year-over-year increase. Walmart’s global e-commerce sales surged 27% and contributed significantly to the overall revenue. This growth was supported by a 28% increase in the company’s global advertising business and a 26% rise for Walmart Connect in the U.S.

Is Walmart Stock a Buy Today?

Walmart is a buy after in spite of the recent share price plunge if you are to believe analysts who forecast a $108 per share price target.

Digital transformation and the adoption of robotics will be the foundations for the company’s return to faster growth over the next decade.