Walmart's Strategic Resilience in the Face of Amazon's Expansion

In the ever-evolving retail landscape, Walmart (WMT) stands as a testament to the power of operational scale and strategic adaptability. As Amazon (AMZN) continues to expand its footprint in e-commerce and fresh food delivery, Walmart's recent price target increase to $115 by Guggenheim Securities underscores its resilience. This move, coupled with a compelling valuation relative to peers like Costco (COST), positions Walmart as a compelling long-term investment.

Operational Scale and EBIT Growth: The Foundation of Resilience

Walmart's ability to maintain a “Buy” rating despite Amazon's aggressive expansion hinges on its robust operational fundamentals. Guggenheim's raised price target reflects expectations of 4.4% sales growth and 8.7% EBIT growth in Q2 2026, with potential for full-year EBIT guidance to rise above the current 3.5–5.5% range. These figures highlight Walmart's capacity to convert scale into profitability, even as it faces margin pressures from inflation and rising labor costs.

The company's supply chain infrastructure is a critical differentiator. With over 5,500 stores and a vast network of distribution centers, Walmart can offer faster delivery times and lower costs than Amazon in many markets. This is particularly evident in its same-day delivery services for groceries, a sector where Amazon has heavily invested. Walmart's ability to leverage its physical footprint for last-mile delivery creates a hybrid model that competitors struggle to replicate.

PEG Ratio Advantage: A Valuation Edge Over Costco

One of the most compelling arguments for Walmart's outperformance lies in its valuation metrics. Guggenheim notes that Walmart trades at a 17.4x multiple relative to its 2026 estimated EBITDA, compared to Costco's 3x PEG ratio. While the exact PEG calculation for Costco in the research appears inconsistent (with some data suggesting a 6.1x PEG), the broader narrative remains valid: Walmart's valuation is more attractive when considering its growth potential.

Costco's membership-driven model has historically delivered strong earnings growth, but its higher PEG ratio implies it is overvalued relative to its growth trajectory. Walmart, by contrast, benefits from a more diversified revenue stream, including its high-margin Walmart Connect advertising platform. This business, which grew over 30% in the latest quarter, is a key driver of future profitability and justifies a premium valuation.

Strategic Initiatives: Walmart Connect and Global Expansion

Walmart's long-term outperformance is further supported by its strategic investments. Walmart Connect, its digital advertising arm, is expanding rapidly, targeting small and medium-sized businesses that seek cost-effective marketing solutions. This segment's growth not only diversifies Walmart's revenue but also enhances customer stickiness, as advertisers become integral to the platform's ecosystem.

Globally, Walmart is leveraging its international presence to offset U.S. market saturation. Its acquisition of Vizio and continued expansion in India through Flipkart provide new avenues for growth. These moves position Walmart to capitalize on emerging markets, where e-commerce adoption is accelerating and competition from Amazon remains fragmented.

Investment Implications

Despite Amazon's dominance, Walmart's operational scale, supply chain efficiency, and strategic innovation create a moat that is difficult to breach. Guggenheim's $115 price target implies a 13% upside from current levels, aligning with the firm's view that Walmart's valuation has room to expand. For investors, this represents an opportunity to capitalize on a company that is not only defending its core markets but also building a foundation for sustained growth.

In conclusion, Walmart's strategic resilience—rooted in its operational scale, EBIT growth potential, and innovative initiatives—justifies a “Buy” rating. While Amazon's expansion poses challenges, Walmart's ability to adapt and diversify ensures it remains a cornerstone of the retail sector. For those seeking long-term value, Walmart's combination of fundamentals and forward-looking strategy makes it a compelling choice.