UBS has lifted the valuation multiple underpinning its Walmart (NYSE: WMT) price target to roughly 40 times calendar 2028 earnings, up from 35 times previously, a significant re-rating that signals growing conviction in the retailer’s profit trajectory.
The revised multiple drove an increase in the bank’s price target to $149, compared with its prior target of $130, reflecting a view that Walmart’s earnings engine has become structurally more powerful than top-line sales figures alone would indicate.
Central to the UBS investment thesis is the rapid expansion of eCommerce and alternative revenue streams, which are generating profits that conventional comparable sales metrics do not fully capture.
These higher-margin businesses, UBS argues, give Walmart the financial flexibility to keep cutting prices and improving convenience for shoppers while still delivering attractive operating income growth.
One risk the bank flagged sits inside the cost structure: UBS estimates Walmart absorbed approximately $650 million in additional freight expenses during the quarter under review.
That freight burden, combined with accounting changes tied to retail inventory method adjustments, is expected to pressure domestic gross margins, with UBS forecasting a 16-basis-point year-on-year shift in gross margin as a share of net sales.
Market consensus has assumed roughly flat margins, though UBS believes Walmart’s underlying US gross margin retains the capacity for 30 to 50 basis points of typical expansion once those one-off headwinds are stripped out.
On the sales side, UBS anticipates Walmart will meet or modestly beat expectations for US comparable sales growth in the range of 2% to 3%, driven by positive customer traffic trends and continued momentum in eCommerce.
The bank also contends that recent price investments carry a compounding benefit, strengthening Walmart’s value perception among consumers and drawing in new shoppers beyond the immediate volume uplift.
Following the quarterly results, UBS expects Wall Street analysts to mark up their earnings estimates by between $0.03 and $0.05 per share, which could prompt Walmart to lift its current full-year earnings per share guidance range of $2.80 to $2.87.
Despite the constructive outlook, the bank cautioned that the results may not produce a meaningful move in the stock, given the shares’ recent run and an already elevated valuation of approximately 39 times calendar 2027 earnings per share.
The broader argument UBS is making is that market share gains, digital growth, and higher-margin ancillary businesses together form a durable earnings story that justifies paying a premium multiple well above historical norms.
