1 Incredible Reason to Buy Walmart (WMT) Stock Before It Reports Earnings on Aug. 20 -- and 1 Reason Not To

Walmart’s dividend yield is ~0.9% (up ~6% average annual payout growth over 5 years), and recent performance remains solid with revenue +7.3% and operating income +5% in the last quarter. E-commerce is accelerating with 26% YoY delivery/pickup revenue growth and 17% membership fee growth. However, valuation looks stretched (price-to-sales 1.24 vs 5-year avg 0.83; forward P/E 38 vs 27), and the article suggests waiting for a lower entry ahead of its Aug. 20 Q2 results.

Analysis

WMT looks like a quality compounder that is already being priced like one, so the trade is more about valuation defense than fundamental surprise. The key market mechanism is that the stock’s multiple now embeds continued share gains, steady traffic, and margin resilience; if any one of those slows, the downside is mostly multiple compression rather than an earnings miss. That asymmetry is why the setup is less attractive into the next earnings print than the business headlines suggest.

The second-order effect is competitive pressure on lower-end retail and grocery, where WMT’s scale lets it absorb price investment and fulfillment costs that smaller chains cannot. That means the pain can show up in regional grocers, dollar stores, and local omni-channel operators before it shows up in WMT’s own numbers. If WMT continues leaning into pickup, delivery, and membership, it strengthens the “recurring revenue” narrative, but it also raises the hurdle for peers that lack a true subscription flywheel.

Contrarian view: the consensus may be underestimating how little upside is left if results are simply good. A 38x forward multiple turns a defensive name into a duration asset, so even a clean quarter can trade poorly if operating leverage does not re-accelerate. The thesis is falsified if management delivers another quarter of strong traffic plus margin expansion and raises full-year guidance; otherwise, the stock can de-rate over the next 1-3 months even without a fundamental stumble.

Key Decisions for Investors

• Avoid initiating a fresh outright long in WMT before the Aug. 20 print; the risk/reward is poor unless you have conviction that guidance will re-accelerate. Better entry is on any post-earnings pullback if the company confirms margin expansion and sustained comp momentum.
• Use a defined-risk bearish expression: buy a short-dated WMT put spread into earnings to play valuation compression if results are merely in-line. Keep sizing small; the thesis only works if the market starts to question the premium, not if the quarter disappoints outright.
• Relative-value idea: prefer COST over WMT as the cleaner recurring-revenue retail compounder if you want defensive consumer exposure. The pair is about quality and durability, not cheapness; WMT is more exposed to multiple compression if growth normalizes.
• Watch regional grocers and dollar stores for spillover weakness over the next 1-3 months; WMT’s scale can keep taking share even without a dramatic macro slowdown, pressuring lower-productivity formats first.