(Bloomberg) -- Walmart Inc.’s blistering stock rally has shown no signs of cooling, with shares posting their strongest start to a year in more than three decades. Now, Wall Street is turning to the retailer’s earnings report on Thursday for confirmation that recent exuberance is justified.
Fresh off their best annual performance since 1998, Walmart shares have climbed another 15% to start 2025, handily outperforming the broader market and propelling the stock to fresh records. While expectations are high, analysts and investors are optimistic that strong fourth-quarter results and a solid outlook for the year, driven by Walmart’s market-share gains and the growth of its higher-margin ancillary businesses, will set the stage for further stock appreciation.
“Walmart’s fourth quarter will underscore the fact that the retailer is entering 2025 with robust momentum,” UBS Group AG analyst Michael Lasser wrote in a note to clients. “As such, the market will gain even more conviction the company has a long runway with its multitude of growth levers in 2025 and beyond.”
The key focus of Walmart’s earnings report will be its full-year projections for sales and profit. Analysts largely anticipate the company and its peers will provide measured outlooks, given uncertainty around tariffs and interest rates, and as US consumers remain pinched by stubbornly high prices.
Rival Target Corp. raised its fourth-quarter sales forecast last month following a better-than-expected holiday season. Apparel retailer Lululemon Athletica Inc. also increased its projections, though Macy’s Inc. issued a downbeat outlook. All three chains are expected to report fourth-quarter results in the coming weeks, alongside other retailers including Home Depot Inc. and TJ Maxx owner TJX Cos.
Lasser expects Walmart’s annual forecasts to be relatively consistent with its long-term targets of 4% sales growth and greater operating income growth, though he notes some on Wall Street are expecting more.
“A slightly below-expectation guide alone likely won’t stop the momentum in the stock given Walmart’s track record of guiding conservatively,” said Bernstein Institutional Services LLC analyst Zhihan Ma in a note. However, Walmart is “priced for perfection” and needs to sustain its strong sales trends, and demonstrate its ability to improve margins by growing alternative revenue streams and reducing e-commerce costs, she said.
While Walmart shares look expensive relative to historical levels, it’s also a different company than it was in the past, said Mari Shor, senior equity analyst with Columbia Threadneedle. She highlighted that Walmart is growing market share across income groups, channels and categories. Meanwhile, Shor is positive on Walmart’s margin trajectory given she anticipates the company’s investments are starting to moderate at a time when some of its newer businesses like advertising are beginning to scale.
“I am still incredibly bullish on Walmart, despite the run it had last year and the run it had this year,” she said.
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