Walmart is dramatically separating itself from brick and mortar, analyst says

Roth Capital Markets analyst Bill Kirk says Walmart’s (Walmart Stock Quote, Chart, News, Analysts, Financials NYSE:WMT) third-quarter results delivered a modest beat-and-raise performance, reinforcing the company’s growing advantages heading into the holiday season.

In a Nov. 20 report, he maintained his “Buy” rating and US$108 price target, which is based on a DCF that implies roughly 19 times fiscal 2026 EV/EBITDA and 40 times fiscal 2026 earnings, assuming 10% annual EBIT growth, a 3% terminal growth rate, a 6% WACC and normalized annual capex of US$20-billion.

Kirk said Walmart posted upside on comparable sales and earnings, prompting the retailer to raise fiscal 2026 net sales and adjusted EPS guidance. However, lighter-than-expected gross margins muted flow-through from the net-sales beat and left the quarter without the operating leverage typically expected when sales outperform.

With e-commerce and advertising growth accelerating, Kirk said Walmart remains “strongly positioned for the upcoming holiday spending period” and added that he will look to the company’s conference call for further detail on third-quarter trends and the broader consumer outlook.

Walmart reported revenue of US$179.5-billion, ahead of consensus at US$177.4-billion, with total U.S. comps (excluding fuel) up 4.4% and Walmart U.S. comps up 4.5%, both outpacing expectations of 4.0%. Adjusted EPS was US$0.62, above consensus at US$0.60 and management’s US$0.58–0.60 range. Consolidated gross margin improved two basis points year over year, compared with four basis points in the second quarter and 12 basis points in the first.

Kirk said the gross-margin shortfall relative to expectations tempered the earnings benefit from the revenue beat. Global e-commerce sales rose 27% year over year, up from 25% in Q2, helping drive 53% growth in global advertising and 33% growth in Walmart Connect.

Walmart raised fiscal 2026 guidance across several key metrics: net sales are now expected to grow 4.8% to 5.1% (from 3.75% to 4.75% previously), operating income 4.8% to 5.5% (from 3.5% to 5.5%), and adjusted EPS US$2.58 to US$2.63 (from US$2.52 to US$2.62), with consensus at US$2.61.

Kirk said Walmart’s underlying trends remain robust, supported by automation, data capabilities and a consumer proposition that combines scale with convenience. He highlighted the company’s clear commitment to profit growth outpacing sales, adding that improved store formats, a leading digital ecosystem and a rapidly expanding advertising business are “dramatically separating Walmart from traditional brick-and-mortar competitors.”

He said the model is “inflecting toward a more profitable, less volatile, wider-reaching ecosystem,” and noted that Walmart’s ad revenue as a percentage of GMV remains less than half that of many industry peers, leaving ample room for further growth.

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