Should Investors Buy Walmart Ahead of Q1 2025 Earnings? A Contrarian Play on EPS Headwinds and Strategic Dominance

With Walmart (WMT) set to report Q1 2025 earnings on May 16, 2025, investors face a critical crossroads: act on near-term EPS risks or bet on long-term strategic advantages. While bears highlight a potential post-split EPS decline and a lukewarm Zacks Earnings ESP signal, bulls argue that Walmart’s $159.3 billion revenue growth, e-commerce dominance, and valuation discounts create a compelling contrarian opportunity. Let’s dissect the data to uncover whether now is the time to buy—or avoid—this retail titan.

The EPS Decline vs. Revenue Growth Dilemma

Walmart’s post-split EPS is expected to fall 3.3% to $0.58, driven by margin pressures in grocery and inflation-driven cost headwinds. However, revenue growth remains robust at 4.6%, fueled by its omnichannel strategy: e-commerce sales surged 23% globally in Q4 2024, with store-fulfilled delivery jumping 50%. The EPS dip is not a death knell but a reflection of Walmart’s strategic trade-offs—investing in infrastructure (e.g., Walmart GoLocal, Flipkart) to solidify its hybrid retail model.

The Zacks Earnings ESP of +2.45% suggests a slight positive surprise potential, though bears note Walmart’s Zacks Rank #3 (“Hold”) tempers optimism. Historically, Walmart has beaten EPS estimates four times in the last four quarters, with an average surprise of +7.3%. This consistency hints at resilience, even if the upcoming quarter’s results are softer.

Analyst Price Targets: Bulls vs. Bears in the Trenches

Analysts are divided but cautiously bullish. RBC lowered its price target to $102 but retained an “Outperform” rating, citing Walmart’s automation and margin initiatives. UBS and BMO kept Buy ratings at $110, emphasizing its $12.7 billion FCF generation and e-commerce momentum. Meanwhile, Raymond James trimmed its target to $105, highlighting risks from tariff impacts and slower discretionary spending.

The average price target of $105.75 sits 25% above Walmart’s current price of $84.25. This gap reflects skepticism about near-term EPS but confidence in Walmart’s long-game advantages.

Why Walmart’s Strategic Positioning Beats Amazon’s Headlines

Walmart’s $680.99 billion annual revenue (vs. Amazon’s $638 billion) and 25% U.S. grocery market share underscore its hybrid retail supremacy. While Amazon dominates e-commerce GMV (70.2% of its revenue), Walmart’s 10,500+ stores act as fulfillment hubs, enabling same-day delivery to 90% of households—a critical edge in the $1.2 trillion grocery e-commerce market.

- Amazon’s GMV: Dominates in general merchandise (73% of GMV) but lags in groceries (5%).
- Walmart’s GMV: Grocery fuels 60% of e-commerce sales, with third-party marketplace GMV growing at a 26% CAGR—outpacing Amazon’s 15% CAGR in third-party sales.

Walmart’s EV/EBITDA of 17.31 is 30% below Amazon’s 24.5, yet its 21.4% ROE vs. Amazon’s 20.7% hints at superior capital efficiency. This valuation gap creates a sweet spot for contrarians: a Walmart dip post-earnings could offer a rare entry into a cash-rich, market-leading enterprise.

Supply Chain Resilience: Walmart’s Unsung Advantage

While Amazon invests in AI and robotics, Walmart’s store-based fulfillment network offers a lower-cost, higher-speed alternative. Its Walmart GoLocal and Flipkart integrations enable it to undercut Amazon’s delivery costs in key markets. Even as Amazon expands same-day delivery to 140+ metro areas, Walmart’s proximity to consumers—paired with its $200 million robotics acquisitions—ensures it remains a logistics juggernaut.

• Walmart’s order fulfillment cost per unit: 14% lower than Amazon’s.
• Walmart’s same-day delivery coverage: 90% of U.S. households vs. Amazon’s 75%.

The Contrarian Case: Buy the Dip, Own the Future

The key catalyst here is Walmart’s Q1 earnings reaction. If results land near the low end of its EPS guidance ($0.49–$0.52 post-split), fear of margin pressures could push shares down—a strategic buying opportunity.

Why?
1. Valuation Discount: At $84.25, Walmart trades at 37.9x forward P/E, but its $42 billion TTM EBITDA and 1.7% dividend yield offer stability.
2. Long-Term Tailwinds: Its Flipkart stake (now contributing 12% of operating income) and U.S. e-commerce CAGR of 12% position it to capitalize on a post-recession rebound.
3. Market Share Growth: Walmart’s 8–9% U.S. e-commerce share is climbing, while Amazon’s growth slows amid rising regulatory scrutiny.

Final Verdict: Buy WMT on a Post-Earnings Pullback

Walmart’s Q1 earnings may test investor patience, but its strategic moats—hybrid retail dominance, grocery leadership, and valuation asymmetry—make it a buy on any post-report dip. Target a 10–15% pullback to $75–$80, with a $100–$110 price target by 2026.

Act now, before the market catches up to Walmart’s long-term story.

Disclosure: This analysis is for informational purposes only. Consult a financial advisor before making investment decisions.