Bank of America Sends Strong Message to Walmart Investors

Walmart Inc. (NYSE:WMT) beat both revenue and earnings estimates on August 20, 2026, and still lost roughly 9% of its stock price in a single session, closing at $103.84, its worst single-day decline in over four years.

Bank of America responded by cutting its price target while keeping a Buy rating, a combination that says more about how Wall Street evaluates this stock than either move alone. Moments like this test your financial fitness as an investor, and the details behind both the earnings and the price target cut are worth walking through.

BofA cut the target to $126 from $144 but maintained Buy

Bank of America Securities lowered its Walmart price target to $126 from $144 while maintaining a Buy rating, citing a deceleration in U.S. comparable sales excluding fuel to 2.6%, Investing.com reported. The firm described the selloff as a compelling opportunity to own a secular share gainer, according to Investing.com.

Walmart traded at roughly 38 times trailing earnings at the August 20 close, a premium valuation that amplified the negative reaction to the comp sales miss. BofA indicated the long-term investment case remains intact despite the near-term deceleration.

Walmart beat on revenue and earnings but the comp sales missed

Walmart's fiscal second-quarter 2027 results showed strength in several areas, the company's earnings release confirmed.

• Revenue of $187.94 billion, beating the $186.77 billion estimate and up 5.9% year over year.
• Adjusted earnings of $0.81, beating the $0.74 estimate and up 19% year over year.
• U.S. comparable sales of 2.6% excluding fuel, missing analyst expectations of about 3.5%.
• Global ecommerce sales up 23%, with Walmart U.S. notching its 10th consecutive quarter of growth above 20%.

Pharmacy headwinds from Medicare drug price caps shaved roughly 125 basis points from U.S. comp sales, a drag CFO John David Rainey quantified on the earnings call.

A $2.9 billion tariff refund boosted Q2 profits and shapes Q3 pricing

Walmart received nearly $2.9 billion in tariff refunds during the quarter following the Supreme Court's ruling that struck down tariffs under the International Emergency Economic Powers Act, CNBC confirmed. CFO John David Rainey said just under $100 million of the total remains outstanding.

Rainey indicated Walmart plans to redirect those funds into price cuts for consumers in the third quarter. Gross margin improved 96 basis points year over year to 25.4%, partly because of the tariff refund. The company cautioned investors to evaluate Q2 and Q3 results together to see the true underlying growth rate.

Ecommerce grew 23% globally and the advertising business jumped 38%

Global ecommerce sales rose 23%, driven by store-fulfilled pickup and delivery services alongside continued marketplace expansion, Walmart's earnings release stated. Walmart Connect, the company's U.S. advertising platform, grew 43% excluding the VIZIO smart-TV business it acquired in December 2024, and membership fee revenue climbed 17% globally.

Rainey said on the earnings call that Walmart has not delivered this level of profit growth relative to its U.S. comp in two decades, with almost half the growth coming from membership, advertising, and marketplace.

Why the stock dropped 9% on a day Walmart raised full-year guidance

Walmart raised its full-year outlook alongside the earnings beat, guiding for net sales growth of 4% to 5% in constant currency and adjusted earnings of $2.80 to $2.87. The raise normally supports a stock price, but the comp sales miss dominated sentiment.

The 2.6% comp growth was the weakest pace in roughly six years, and higher fuel prices are creating what Rainey estimated at more than $2 billion in incremental costs above Walmart's original February assumptions. At 36 times earnings, the premium valuation left little room for a miss, and the selloff reflected how narrow the margin for error has become for your position at these levels.

Segment performance across Walmart U.S., International, and Sam's Club

Walmart U.S. posted net sales of $125.2 billion, up 3.5% year over year, while Walmart International reached $35.2 billion, up 12.8% as reported but 7.9% in constant currency. Sam's Club U.S. net sales rose 8.8% to $25.7 billion, though excluding fuel the increase was 4.5%, and ecommerce grew 26%.

Operating income for the quarter reached $9.4 billion, a 28.8% jump that included the tariff refund benefit, Progressive Grocer noted. Adjusted operating income at constant currency grew 17.4% to $9.25 billion, the metric BofA considers more representative of underlying performance.

$25.1 billion remaining in Walmart's $30 billion buyback program

Walmart's February 2026 share repurchase authorization of $30 billion had $25.1 billion remaining at the end of the second quarter, the company's earnings release disclosed. Buybacks at that scale tend to support earnings-per-share growth by reducing the outstanding share count over time.

Walmart also pays a quarterly dividend, making it a holding many retirees count on for income. A 9% pullback on a stock with an active buyback program and a rising dividend may look different to an income-focused investor than to one tracking quarterly comp sales momentum.

Bottom line

BofA's decision to cut the price target while keeping a Buy rating reflects a view that Walmart's long-term shift toward ecommerce, advertising, and membership revenue remains intact even as physical-store comp sales slow. The Q2 results beat estimates on the top and bottom lines, and the company raised full-year guidance, but the 2.6% comp miss and pharmacy headwinds gave the market reason to reprice.

For retirement portfolios where dividend consistency matters most, the choice to start investing in or adding to a Walmart position after a 9% decline depends on whether you see the digital transformation as durable enough to justify paying 36 times earnings for a grocery retailer with a decelerating same-store sales trend.

This article is for informational purposes only and should not be considered investment advice.

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