By Paul R. La Monica

It seems like nothing can knock the smile off the faces of Walmart investors.

Walmart was one of the top stocks in the Dow Jones Industrial Average last year. And while some of last year's big winners (we're looking at you, Nvidia) are off to a tough start in 2025, Walmart continues to shine. Not even worries about tariffs and the possibility of higher prices have been enough to put a dent in the retailer's stock.

Shares of Walmart are up 13% so far this year -- and hit a new all-time high Friday morning before pulling back a bit. This year's rally is in addition to Walmart's 72% surge in 2024. The stock is outperforming its peers by a wide margin as well: The S&P SPDR Retail exchange-traded fund is down about 1.5% in 2025.

The gains have come even as investors worry that President Donald Trump's tariffs on China (and potentially other nations) could lead to higher prices for imported goods -- at a time when consumers still face elevated inflationary pressures.

Even with such an uncertain economic backdrop, Walmart is now worth nearly $825 billion. Its stock needs to go up about another 20% to reach the vaunted $1 trillion market capitalization milestone. Can it get there anytime soon? Analysts are optimistic that shares will keep climbing.

Only five of the 42 analysts who cover Walmart don't have a "buy" or "outperform" rating on it, with four "hold" recommendations and one lonely "sell" rating.

UBS analyst Michael Lasser upped his price target on Walmart last month to $113 a share, about 10% higher from current levels. He cited the retailer's Walmart+ subscription business as well as Sam's Club. Strength in Walmart's membership offerings could contribute 2% to 3% to earnings growth over the next few years, he estimates.

"Walmart is just scratching the surface with its Walmart+ membership program," Lasser wrote. He also noted that Walmart is taking market share from many rivals, including Target, Costco, and fellow Sam's Club competitor BJ's Wholesale -- as well as Kroger and Albertsons in the grocery business.

Ken Mahoney, CEO of Mahoney Asset Management, owns Walmart stock in client portfolios. He highlights surging online sales, higher-income consumers, and better inventory management from artificial intelligence technology as areas of strength.

"If you are looking for just a perfect upwards trending stock, look no further," he said in an email. "It seems like they have never been in a stronger position and we expect that to continue, and the market agrees."

D.A. Davidson & Co. analyst Michael Baker agrees: He says Walmart's investments in supply chain management and AI should boost sales and profits further.

"Automation continues to be a key share and margin driver for Walmart," Baker wrote in a January report.

Still, investors should probably still be a little cautious.

That's because Walmart's shares are in rarefied territory. The stock is now trading at about 41 times earnings forecasts for this fiscal year. That's a five-year high. In comparison, rival Target is trading for 15 times forward earnings estimates. Granted, Target has struggled lately, while Walmart has momentum on its side. The retailer is even trading at a premium to Amazon.com, which is valued at 36 times earnings forecasts.

However, Walmart is still trading at a big discount to Costco stock, which is valued at 58 times earnings estimates and is also near a record high.

Investors should also be prepared for the possibility of conservative guidance from Walmart when it reports fourth-quarter earnings on Feb. 20, Oppenheimer's Rupesh Parikh says. The stock could sell off in that scenario, but Parikh thinks investors should be optimistic.

"We would be positioned to take advantage of any profit-taking should it materialize," Parikh wrote.

In the meantime, investors probably will continue to shrug off any worries about possible U.S. tariffs on China, as well as the now delayed tariffs on Canada and Mexico. Trump's continued trade negotiations make the impact of any pending tariffs "difficult to quantify," according to Parikh. But while trade war worries are a near-term risk, Walmart's massive scale means it should manage tariffs better over time than many competitors, he added.

So even though Walmart stock is now priced like a luxury item, it still might be a good deal for long-term investors.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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February 07, 2025 14:25 ET (19:25 GMT)

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