Is Walmart Still a Buy After Its Strong Run?

As consumer confidence has collapsed, investors have increasingly turned to more defensive names when it comes to retailers. This has helped Walmart's (NASDAQ: WMT) stock get off to a strong start to the year, up about 13% year to date, as of this writing.

With the retail giant recently reporting its fourth-quarter results, let's take a closer look to see whether the stock's momentum can continue.

Solid sales continue

One of the more interesting things about the Walmart story over the past few years is that the retailer has been attracting more affluent shoppers. This has been an important growth driver, especially as lower-income consumers have been stressed due to inflation and tariffs. This showed up once again in Q4, with the company calling out strength in households earning more than $100,000 a year, while sales from households making below $50,000 were weak.

Overall, Walmart saw its revenue rise 5.6% to $190.66 billion, surpassing the $190.43 billion consensus, as compiled by LSEG. Walmart U.S. store sales increased by 4.6% to $129.2 billion, while same-store sales also rose by 4.6%. The number of transactions increased by 2.6%, while the average ticket climbed 2%.

E-commerce sales, meanwhile, climbed 27%. Walmart credited its Sparky agentic commerce tool for helping improve customer engagement, with customers using the AI agent spending 35% more than non-users. The company also saw a 41% surge in U.S. ad revenue in the quarter.

Internationally, sales jumped 11.5% to $31.2 billion, and were up 7.5% in constant currencies. The growth was led by Walmex (Mexico), China, and Flipkart (India e-commerce). International e-commerce sales grew by 17%, and international ad revenue rose 10%.

Sam's Club U.S., its warehouse store concept, saw sales (excluding fuel) increase by 4% to $21.7 billion. Same-store sales, excluding fuel, also grew by 4%. Transactions rose 5.3%, while the average ticket fell by 1.3%. E-commerce sales soared 23%. Membership fees rose 6.1% year over year.

Adjusted earnings per share (EPS) rose 12% to $0.74. Despite tariff pressure, the company saw its gross margin increase by 13 basis points in the quarter and operating income rise 10.8%, or 10.5% in constant currency, helped by investments in automation and the growth of higher-margin businesses like advertising.

Image source: Getty Images.

Looking ahead, Walmart projected its first-quarter sales to rise between 3.5% to 4.5%, with adjusted EPS of between $0.63 to $0.65.

For the full year, it's looking for revenue growth of 3.5% to 4.5% and adjusted EPS of between $2.75 to $2.85. However, that was short of the $2.96 consensus.

Is the stock a buy?

While I think Walmart is doing a great job driving revenue growth and is seeing nice operating leverage through automation, ad revenue, and AI, I'm not buying the stock when it's trading at a forward price-to-earnings (P/E) of above 40 times. That multiple is just difficult to justify, given its mid-single-digit revenue growth and low single-digit operating income growth.

The stock likely remains a defensive safe haven, but the upside looks limited.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.