Walmart stock dubbed a 'valuation concern' ahead of Q2 earnings

Walmart Inc WMT stock remain in the spotlight ahead of the retail behemoth’s fiscal Q2 earnings scheduled to be released before the market opens on August 20.

Consensus is for WMT to record $0.73 a share of earnings (EPS) on nearly $185 billion in revenue, which would represent a more than 5% top-line growth on a year-over-year basis.

Heading into the quarterly release, Walmart shares are hovering roughly around the same price at which they started the year 2026.

Valuation remains an overhang on Walmart stock

In an interview with CNBC this morning, Globalt Investments’ portfolio manager, Keith Buchanan, – said he’s been “impressed with Walmart’s execution” in recent years, especially since it has been “able to drive traffic” even as the consumer traded down.

However, he views WMT shares as a “valuation concern” heading into the earnings event.

At the time of writing, the retail giant is trading at a forward price-to-earnings (P/E) ratio of nearly 40x, which makes it expensive to own not when compared to its peers only, but also than the top AI stocks.

Nvidia, for example, is trading at about 25x forward earnings currently.

In short, these valuation concerns could make it more challenging for Walmart Inc to rally after its fiscal Q2 earnings tomorrow.

Options pricing signals downside in WMT shares

Crucially, the derivatives market seems to agree with Buchanan’s cautious approach toward WMT as well.

According to the latest data from Barchart, the put-to-call ratio on option contracts expiring at the end of this week sits at 2.53 currently, indicating a very strong bearish skew.

And the lower price on those contracts is set at $112 as of writing, signaling potential for over 4% decline in Walmart stock immediately after reporting earnings.

Despite recent gains, WMT currently sits below its 100-day and 200-day moving averages (MAs),  indicating the broader downtrend remains intact heading into the quarterly release.

How to play Walmart heading into Q2 earnings

Ultimately, tomorrow’s earnings report serves as a high-stakes litmus test for whether Walmart’s fundamental operational strength can offset its rich market valuation.

With option traders positioning heavily for downside volatility and the stock languishing below key technical MAs, even a modest top-line miss or cautious second-half guidance could trigger a sharp recalibration in the share price.

Conversely, to break out of its multi-month slump and justify its premium forward multiple, the retail titan will need to demonstrate strong margin expansion, sustained market-share gains, and accelerated growth across its high-margin advertising and e-commerce initiatives.

What’s also worth mentioning is that Wall Street analysts, nonetheless, are bullish on WMT stock heading into earnings event.

The consensus rating on the retail behemoth sits at Strong Buy, with the mean price target of about $140 indicating potential upside of more than 20% over the next 12 months.