Walmart poised to deliver solid Q1 report as analysts see continued share gains and improving profitability ahead

Walmart Inc (NYSE:WMT, ETR:WMT) will report its fiscal first-quarter 2025 financial results on Thursday, with Bank of America analysts repeating their ‘Buy’ rating ahead of the release, citing continued market share gains and improving long-term profitability.

They also maintained their price target of $120, representing upside from Walmart's share price on Monday afternoon of about $96.

Bank of America forecasts adjusted Q1 earnings per share of $0.59 and a 3% increase in US comparable sales for the quarter. This represents a deceleration from the previous quarter but aligns with third-party sales data trends.

Several one-time factors are expected to affect the company's results, including the leap year comparison, expected to reduce sales by 100 basis points and earnings before interest and tax (EBIT) by 250 basis points.

Walmart's Vizio acquisition is expected to add 15 basis points to sales but weigh on EBIT by 70 basis points, and foreign exchange headwinds are estimated to lower earnings by $0.02 per share.

Tariff impact

Bank of America sees Walmart as well-positioned to manage emerging tariff risks, even if the retailer cannot completely avoid them.

“While not immune, we see Walmart well-positioned to manage tariffs given deep relationships with suppliers, advanced pricing, automation, and inventory management, and potential to shift imported first-party goods to third-party marketplace,” they wrote.

Notably, with a 60% grocery mix, Walmart US has limited exposure to imports, only one-third of total goods, with just an estimated 15% sourced from China.

Bank of America also highlighted Walmart’s digital advertising and ancillary business performance as a key profit driver.

These areas, which include advertising, data monetization, and financial technology, have grown at a 40% annual rate over the past four years and are expected to account for two-thirds of the company’s total profit growth in the coming years.

“Even in a more challenging macro, Walmart’s scale and unique position in omnichannel position it to continue growing digital ad dollars,” the analysts wrote, citing strong growth among marketplace sellers and the Vizio acquisition as catalysts.

Elevated valuation justified

While Walmart’s valuation is elevated, currently trading at a price-to-earnings multiple of 33 times, near two-decade highs, Bank of America believes it is justified.

“We reaffirm 'Buy' on Walmart as share gains continue across product categories and incomes (especially $100,000+) as its strong value offering and digital convenience resonate,” they wrote. 

The improving long-term profit outlook, underpinned by growth in digital advertising, third-party marketplace expansion, and narrowing losses in core eCommerce, supports the bullish stance, they added.