After asking you lot why Walmart tripled in 3 years and was now trading at a 45 PE – I went away and did some DD to decide if worth investing my life savings in puts.
Quick recap: Walmart has stagnant revenue growth around 5%, slowing EBITDA growth around 3% – yet tripled on hype it's a tech stock because it has a website now. Despite tech stocks having an awful few months??
Walmart is Schrödinger’s stock: somehow both a bond proxy defensive that deserves a dirt-cheap discount rate and a hyper-growth monster that deserves a nosebleed multiple.
An analyst downgraded the stock shortly after the post. Since then, Walmart has started to underperform other consumer defensives which is what you want to see maintained for the short thesis to pan out.
The shorting theory is consumer defensive are overbought due to recent events, and Walmart is extremely overbought as one of the leading defensives, once consumer defensive rerates, Walmart will lead the plunge down.
Market Sector Performance Year To Date
Most agreed Walmart's valuation was goofy, but I investigated the theories people put up. Walmart being a real estate play didn't seem to be the reason, it has $100b in shareholder equity on a $1t market cap.
Basically, to justify the current stock price, buy side analysts are predicting massive margin growth from the Walmart website generating high margin ad revenue.
The Walmart website does have strong growth, growing from around $25b in 2019 to $105b last year. Already a significant chunk of its $700b in total revenue.
Despite this growth, since 2019 the EBIT Margin has stayed around 4% and total revenue growth has remained around 5%. Hasn't moved the needle so far.
Revenue YOY Growth – Factoring In Inflation Pretty Low
Amazon is estimated to generate $30b in profit from its ecommerce business (excludes AWS). Even if you assume Walmart completely kills Amazon, you get $50b combined profit. Walmart would then be trading at 20 times earnings which is historically high.
Doing a discounted cash flow valuation, if Walmart muddles along at current trend it's 68% overvalued.
DCF Analysis – Current Trend Forecast
DCF Analysis – Current Trend Assumptions
If you put in some rosier assumptions, assuming Walmart's online business really takes off – assuming a lower cost of capital, revenue growth acceleration and margin acceleration. You still get 17% overvalued, basically there was some justification for the valuation late last year, but this year's surge is goofy.
DCF Analysis – Rosy Assumptions
Insider's may agree as they are selling.
I do think Walmart will rerate at some point in the next year or two, their recent guidance wasn't optimistic. Once the market stabilises and AI panic subsides money will shift out of consumer defensives. Walmart is priced like a growth stock but has almost no growth.
I've bought some puts, is now the perfect time… well I'm a retard so probably not. But here's hoping.
These are my $WMT positions:
Walmart's ($WMT) Valuation Still Doesn't Make Any Fucking Sense
byu/ini0n inwallstreetbets
Posted by ini0n
19 Comments
Same .. WMT at this multiple is dumb af
Have you considered Poor Man’s Covered Put? Sell the short monthlies or weeklies and lower your cost basis on the long puts.
Its priced like we’ll all be working there in wage cages, that’s the elites plan for us.
I thought it was overpriced at $100 back in early 2025 and bought long-dated puts and now I’m working behind the Wendy’s dumpster.
TLDR: Yada, yada, yada… market can stay irrational longer than you can stay solvent.
I agree people will say stupid shit like “iTs a tEcH sTocK nOw” as if using tech in your business makes you a fuckin tech company ffs.
Funny enough people also argue walmart is a defensive stock yet consumer goods is one of the most sensitive sectors to literally anything happening globally.
WMT is what autists buy when they try to be conservative
WMT delivery, paramount plus with walmart +, and target pissing off its customers
There’s an outsize effect of market banking people don’t account for. The range bound nature of the recent months have resulted in a lot of cash flowing into “safe” stocks when there’s no other obvious place to turn.
Some would suggest that at a certain point this outsize inflow makes these stocks unsafe.
But 45 PE aint 300 PE tho
What about WMT and its gamble on SYM? If it takes off, then the groceries should be cheaper than Aldi and Costco. If not, then it’s going the way of target.
I ordered something last night and got to me in 10hrs. Just barely over $35 to get free shipping. Amazon 2.0 but even cheaper prices. No way this is sustainable 😂
i think market sentiment is generally high with s&p pe trailling at 29x. the sentiments can turn quickly if rate hike becomes reality given inflation from high oil price
When has WMT ever traded at a “reasonable valuation “? It is more like a bond.
In spite of this, WMT has returned +209% over the past 5 years vs the S&P returning +75%. Last year fully diluted eps were +26%, and the previous year eps were +37%. It is ubiquitous and the low cost provider in the industry at a time when the cost of living is front page news every day.
It may rerate at some point, but I couldnt begin to tell you when. Expect the global markets to go wildly risk on and markets to shift out of defensives? Ok…
Just my two cents, but my contrarian view is that WMT is pretty much the only consumer staples company out there that won’t go under when the market is having a hard time (COST has been struggling hard), so people are putting a lot of faith in them as the only leader of that sector. It doesn’t help that they recently swapped to the NASDAQ, which (like LLY) anchors their market cap to that shiny $1T valuation.
TL;DR: There’s probably too much institutional money parked in WMT right now for being the only decent staples play. So there are hard floors that’ll be difficult for bears to plough through.
So Call’s?
Part of the reason they’ve been so successful lately is their full throated adoption of AI. We hear a lot about how companies find AI useless or undercooked but Walmart has been huge beneficiary and a posterchild for integration. Apparently they’re not only working with chat GPT to have their stuff advertised but they’re also using in at corporate on the [supply side ](https://www.supplychaindive.com/news/4-walmart-supply-chain-ai-uses/760891/)and to automate procurement. CTO recently said 40% of their code is also being written by AI which is saving them a lot too.
Their website is clunky and not user friendly but there is an element of “it’s not Amazon” that keeps some customers using it
Also, you can schedule your Walmart delivery for a specific 1 hour time slot. Amazon doesn’t offer that.
> I do think Walmart will rerate at some point in the next year or two
> I’ve bought some puts
Hope you win, but trying to time drops on consumer defensive stocks is a fool’s errand. Costco has been massively overvalued by all metrics for over 5 years now (and at least mildly overvalued for a decade+). It’s not a stock I’d ever dream of betting against, and Walmart is pretty much the same.
I thought it was expensive in 2021..
Reality is that they are such a low margin business that any small operational improvement they can make with robotics, automation, and ai could double it or more, effectively doubling net income.