Freedom Broker experts: Walmart is turning stores into digital infrastructure

The scale of the business and an improvement in the profit mix make Walmart (WMT) shares attractive to buy, according to Freedom Broker analysts. The analysts set a target price of $124. With the stock currently at $107.1, the upside potential is 15.78%.

Read more here in the biweekly market review No. 353 on the Freedom Broker website.

The world’s largest retail company

Walmart is one of the world’s largest omnichannel retailers. The company operates more than 10.9 thousand stores in 19 countries and develops online platforms. Each week, its stores and services serve about 280 million customers and members of its club programs.

Walmart’s business is divided into three reporting segments: Walmart U.S., Walmart International, and Sam’s Club. The company’s revenue for fiscal 2026 totaled $713.2 billion. Market capitalization at the time of preparing the review was estimated at $841,374 million.

Scale supports profit growth

The scale of the business and an improvement in the profit structure make WMT shares interesting to buy with a $124 target, Freedom Broker experts note. The key element of the investment thesis, analysts say, is Walmart’s omnichannel model. The company uses its network of physical stores as infrastructure to process and fulfill online orders, combining traditional retail with a marketplace, delivery, advertising, and membership programs.

In the second quarter of fiscal 2027, Walmart’s global online sales grew 23% year over year. In the Walmart U.S. segment, the figure increased 24%. Store-fulfilled delivery volume rose 40%, and net sales of the U.S. marketplace increased by more than 50%.

Analysts believe further scaling of the platform should improve delivery unit economics, increase shopping frequency, and further strengthen Walmart’s market position.

Advertising and subscriptions are changing the business structure

Walmart is consistently expanding higher-margin lines of business and reducing profit dependence on traditional low-margin retail. The company is developing its advertising platform, marketplace, fulfillment services, and Walmart+ membership program. In the latest quarter, revenue from its global advertising business rose 38%. Walmart Connect revenue excluding VIZIO increased 43%, and membership fee income rose 17%.

Analysts expect that the combination of growth in these areas and improved e-commerce economics will drive operating profit to grow faster than overall revenue.

Comparable sales slowed

In the second quarter of fiscal 2027, Walmart U.S. comparable sales excluding fuel grew 2.6%. Transaction count increased 1.5%. Walmart continued to expand market share among shoppers across income levels. Walmart+ subscriber count posted a record second-quarter increase, which analysts believe confirms the attractiveness of the company’s value proposition and the convenience of its services.

However, the comparable-sales pace was below the market’s 3.7% expectations and was the lowest in more than six years. Shoppers spent less per visit, although purchase frequency was unchanged. The trend was also affected by weaker pharmacy performance due to drug-price regulation and more cautious consumer behavior.

Revenue beat expectations

Walmart’s total revenue in the second quarter grew 5.9% to $187.94 billion, beating the market forecast of $186.77 billion. Net income fell 9.4% to $6.37 billion. Adjusted earnings were $0.81 per share versus expectations of $0.74. Walmart shares fell more than 8% at the open on August 20 after the results were released. Investors were concerned by the slowdown in comparable sales and a weaker-than-expected profit outlook for the third quarter.

Despite the initial market reaction, Chernov assessed the potential for further sharp declines as limited. For the stock to return to sustainable growth, Walmart will need to demonstrate a recovery in comparable sales in the coming quarters.

Walmart raised its full-year guidance

After strong first-half results, management improved its outlook for fiscal 2027. Walmart expects revenue growth in constant currency of 4–5% versus the previous 3.5–4.5% range. Adjusted operating income is expected to increase 7–8.5%. The adjusted EPS forecast was raised from $2.75–2.85 to $2.80–2.87.

For the third quarter, the company expects sales growth of 3–3.75% and adjusted earnings of $0.62–0.64 per share. The latter was below the $0.69 consensus. From January to June, Walmart allocated $5.1 billion to share buybacks. The remaining available balance of the authorized program is $25.1 billion.

Financial metrics will continue to grow

According to Freedom Broker’s forecast, Walmart’s revenue will increase from $713,163 million in fiscal 2026 to $752,560 million in 2027 and $785,954 million in 2028.

Adjusted EBITDA is expected to rise from $44,028 million to $49,272 million and $53,584 million, respectively. Adjusted net income may increase from $22,270 million in 2026 to $26,003 million in 2027 and $28,326 million in 2028. Adjusted diluted EPS is forecast at $2.73 in fiscal 2026, $2.88 in 2027, and $3.20 in 2028. EBITDA margin should increase from 6% to 7%, and operating margin from 4% to 5% by 2028.

This is not an individual investment recommendation.