Despite Walmart Inc.‘s (NASDAQ:WMT) recent stock drop following a softer-than-expected third-quarter outlook, UBS analyst Michael Lasser remains highly optimistic, pointing to the retailer’s rapid expansion in lucrative e-commerce and advertising sectors as key drivers that “support the bull case.”
The Three-Pillar Bull Case
Speaking on CNBC’s Squawk Box, Lasser outlined the three primary factors driving Walmart’s premium valuation over the last 18 months. First, he highlighted the retailer’s “stable core business,” noting that Walmart commands “one out of every five grocery dollars in the United States.”
Second, Lasser pointed to “automation and technology that’s going to make the business much more profitable.” Finally, he emphasized the importance of “rolling in new revenue streams that are very high margin.”
Elaborating on this final point—which he believes will sustain the company’s long-term trajectory despite near-term consumer pressures—Lasser noted that Walmart’s “eCommerce grew 24% in the U.S.” and its “advertising business grew 38% in the U.S.” He concluded, “These are very comfortable growth levels that continue to support the bull case on this stock”.
Q2 Financials vs. Q3 Guidance
Lasser’s bullish perspective contrasts with the immediate market reaction to Walmart’s recent earnings report. The retail giant beat second-quarter estimates, reporting adjusted earnings of $0.81 per share against a $0.74 consensus, and generating $187.9 billion in sales.
However, the company’s shares fell by roughly 9% on Thursday after it issued soft third-quarter guidance. Walmart projected third-quarter adjusted EPS of $0.62 to $0.64, falling short of the $0.68 Wall Street estimate.
Consumer Headwinds
The cautious third-quarter outlook and subsequent stock drop reflect a tightening macroeconomic environment. During the earnings call, Walmart Chief Financial Officer John David Rainey warned that rising fuel costs are impacting shopper behavior.
When fuel prices increase and get above $4, perhaps there’s a psychological impact to that,” Rainey told analysts. “Consumers are making trade-offs.”
Additionally, its U.S. comparable sales increased 2.6%, driven by higher transactions; this was the retailer’s smallest quarterly increase since 2020. Pharmacy deflation tied to new maximum fair price regulations, which took effect Jan. 1, created a 125-basis-point headwind to comparable sales.
Despite these near-term consumer pressures and a slowing core retail growth rate, analysts like Lasser believe Walmart’s high-margin digital and advertising shift will ultimately sustain its long-term growth trajectory.
How Has WMT Performed In 2026?
WMT shares fell 6.79% year-to-date, rose 1.24% over the last year, and fell 15.57% over the last six months. It closed 9.15% lower at $103.84 per share on Thursday, and it was 0.39% higher in premarket trading on Friday.
Benzinga’s Edge Stock Rankings indicate that WMT maintains a weak price trend in the short, long, and medium terms, with a solid quality score.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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