Walmart just had its worst day in 4 years. JPMorgan says buy it now

JPMorgan says Walmart’s 9% Thursday drop (worst day in four years after lackluster guidance and a same-store sales miss) creates a buying opportunity, keeping an overweight rating despite lowering its price target to $125 from $137. The new target implies nearly 21% upside from Thursday’s close, with JPMorgan arguing “wash out” is done and trends should improve as alternate profit pools and AI automation benefits accelerate. The note also frames the bear case as largely relative-valuation-based (including assumptions about tariff refund timing into 2027).

Analysis

The selloff looks more like a reset of near-term expectations than a durable break in the franchise. The market is punishing the parts of the model most sensitive to elastic consumer behavior and price investment, but the higher-margin mix from marketplace, advertising, and automation is the more important 12-18 month driver; that is why the drawdown can coexist with a still-constructive longer-term thesis. The key question is whether the miss reflects share loss or deliberate pricing/assortment reset — if it is the latter, margin pressure can be temporary but earnings revisions will lag for 1-3 quarters.

Second-order, a weak WMT print is not uniformly bullish for the rest of retail. If Walmart is forcing more value positioning, dollar stores and value grocers may get a brief relative-trade boost, but they also face the same lower-income consumer constraint, so the better read-through is on traffic elasticity across the sector rather than clean share capture. TGT is the most obvious relative beneficiary if investors rotate into a cleaner discretionary recovery story, while DG/DLTR remain exposed if the problem is broader demand compression rather than one-company execution.

The contrarian view is that consensus may be overconfident in the durability of price-led traffic gains and underappreciating the lag between pricing actions and customer response. However, the stock can still bottom before fundamentals do if management gives any evidence that marketplace/ads are offsetting retail margin pressure. The thesis is falsified if the next 1-2 quarters show continued comp deterioration without a corresponding step-up in higher-margin revenue streams, or if guidance needs another cut after the current reset.

Key Decisions for Investors

• Wait for confirmation before adding to WMT: use the next earnings/traffic update as the decision point; buy only if comps stabilize and gross margin pressure narrows, because the near-term risk is another estimate reset.
• Relative-value long WMT / short TGT only if you believe the market is over-rotating into a 'cleaner retailer' trade; otherwise avoid forcing the pair until there is evidence WMT traffic is stabilizing.
• Trade the read-through via DG or DLTR as a short-term hedge against a broader lower-income demand slowdown; cover quickly if sector data show share shift rather than category weakness.
• For longer-only accounts, consider staged entries in WMT over 4-8 weeks rather than an immediate full-size buy, since post-washout rebounds often fail before analyst revisions turn up.