Walmart Eyes Trillion-Dollar Market Cap Amid Strong Growth
Eight companies now boast a market cap exceeding $1 trillion: Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Tesla, and Berkshire Hathaway. While these stocks have enriched many investors, they are not typically known for offering dividends. However, this may soon change.
Walmart’s Remarkable Performance in Retail
Walmart (NYSE: WMT), the largest retailer globally and top company by revenue, has significantly outpaced the retail sector in recent years. Its focus on omnichannel sales and reputation for competitive pricing have driven its growth, while many competitors grapple with inflation and sluggish consumer spending.
On Tuesday morning, Walmart released strong quarterly results. Comparable-store sales in U.S. stores (excluding fuel) rose 5.3%, marking its highest performance in over five quarters. Additionally, its Sam’s Club division saw a 7% increase in comparable-store sales, excluding fuel.
International revenue, historically challenging for Walmart, increased by 12.4%, reaching $30.3 billion. Overall, revenue climbed 5.5% to $169.6 billion, surpassing expectations that averaged $166.6 billion.
In addition to revenue growth, Walmart showed improved margins. Gross margin increased by 21 basis points to 24.2%, aided by effective inventory management and reduced markdowns in U.S. stores. Operating income rose 8.2% to $6.7 billion, leading to adjusted earnings per share (EPS) increasing from $0.51 to $0.58, beating expectations of $0.53.
Walmart is also capitalizing on new growth areas like advertising, which surged 28% in revenue, alongside strong global e-commerce sales, which increased by 27%. This growth allows it to gain market share from competitors, including Amazon.
The company has raised its sales guidance, indicating optimism for the upcoming holiday quarter. It now anticipates net sales to grow between 4.8% to 5.1%, with full-year adjusted EPS projected between $2.42 to $2.47.
Image source: Getty Image.
Walmart Approaches $1 Trillion Valuation
On November 19, Walmart’s market cap exceeded $700 billion for the first time, placing it on the path toward a $1 trillion valuation. With a current stock performance that has surged 66% year-to-date, achieving this milestone appears possible, though replicating such growth in the following year could be challenging.
The main concern regarding Walmart’s stock is its valuation. Based on EPS projections, the stock carries a price-to-earnings ratio of 35, well above most retail competitors and comparable to the major tech firms in the trillion-dollar club like Microsoft and Apple.
Walmart’s performance justifies this premium due to its effective strategies and consistent margin expansion. A decade ago, many believed Amazon would dominate the market, yet Walmart responded proactively by enhancing its omnichannel offerings, exploring advertising opportunities, and solidifying its competitive edges in pricing and convenience.
Despite its heightened valuation, Walmart’s dividend yield has dipped to just 1%. However, it boasts an impressive track record of annual dividend increases for 51 consecutive years, earning it the title of Dividend King.
Assessing Walmart as a Potential Investment
Walmart’s third-quarter results were nearly perfect, underscoring the numerous advantages it holds, such as large-scale operations, a business model resilient to economic downturns focused on food and groceries, and growth avenues in advertising and e-commerce.
Although the current valuation may seem steep, Walmart has demonstrated its capability to navigate challenging conditions. As it continues to refine its approach to general merchandise, the company is well-poised for sustained growth as it approaches a potential $1 trillion market cap. For those seeking a blend of growth and income, Walmart presents a compelling option.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Tesla, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
