Morgan Stanley revisits Walmart stock price target pre-earnings

There’s a version of Walmart most people still picture. Fluorescent lights, crowded aisles, maybe a cart with a wobbly wheel. That version still exists. But the company Wall Street is paying 43 times forward earnings for? That’s a different beast entirely.

As of 2026, Walmart is a 63-year-old company, and the second-largest by revenue globally and the largest private employer in the world, with approximately 2.1 million employees.

Morgan Stanley met with Walmart (WMT) management during the quarter. What they heard reinforced a thesis the firm has been building for a while. Walmart’s e-commerce, membership, and advertising businesses are compounding in ways that brick-and-mortar retail never could. 

“Valuation should remain supported as WMT translates its scale and tech advantages,” Morgan Stanley wrote in a note shared with me at TheStreet.

Morgan Stanley reiterates Walmart stock overweight rating and $140 price target

On May 10, 2026, the firm reiterated its overweight rating and $140 price target ahead of the company’s first-quarter fiscal year 2027 earnings, scheduled for May 21, according to the note.

The phrase Morgan Stanley keeps coming back to is “flywheel.” It’s not just a buzzword here. It describes a self-reinforcing loop where e-commerce growth pulls in marketplace sellers, who attract advertisers, whose dollars fund better pricing and convenience, which attracts more shoppers.

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My review of the data suggests the flywheel is spinning faster than the headline numbers imply. In the fourth quarter of fiscal 2026 on Feb. 19, Walmart U.S. e-commerce sales grew 27% year over year. Walmart Connect, the company’s advertising business, grew 41% YoY in the same period, according to Walmart’s earnings report.

Now, Morgan Stanley says Walmart is beginning to export that model internationally, taking the U.S. advertising and marketplace playbook into global markets. That’s a newer development worth watching.

Morgan Stanley’s AlphaWise survey also pointed to record Walmart+ membership counts heading into the quarter, a signal that the membership flywheel is still accelerating, the note indicated.

What Morgan Stanley expects from Walmart’s Q1 earnings

Wall Street’s consensus estimate for Walmart U.S. comparable store sales growth in Q1 sits at 3.9%, according to the Morgan Stanley note. But Morgan Stanley thinks investor expectations are quietly running higher in the 4.0% to 4.5% range.

Morgan Stanley sees roughly two points of upside to consensus estimates for adjusted operating income and earnings per share (EPS) growth of 8% in Q1, according to the note. A few factors are driving that view:

Food inflation: It’s running at roughly 2.3% in February and March 2026, providing a supportive backdrop for grocery comps.Trade-down dynamics: Higher-income households continue to shift toward Walmart for value.FX tailwind: The Mexican peso strengthened roughly 16% against the U.S. dollar during the quarter, a net positive, given that Walmart de México represents about 13% of consolidated adjusted operating income.Pharmacy headwind: Maximum Fair Pricing implementation and a shift toward lower-cost generic GLP-1 prescriptions will drag comps by roughly 100 basis points.
Source: Morgan Stanley note

I crunched the numbers on the freight and diesel picture. Morgan Stanley estimates a roughly $1 billion annualized headwind to profitability at current prices, though the Q1 impact is expected to be limited to around $100 million before mitigating actions, according to the note.

Walmart trades at roughly 43 times next-12-months price-to-earnings (P/E), about 21 times above its 10-year historical average.

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Why Walmart’s full-year guidance is likely staying put for now

Here’s the part that could frustrate bulls looking for a raise. Morgan Stanley doesn’t expect Walmart to lift its full fiscal-year 2027 guidance after Q1, and the culprit is gas prices.

Walmart has a well-established pattern of underpromising and overdelivering. Its standard algorithm calls for roughly 4% constant-currency net sales growth with operating income growing modestly faster. 

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In fiscal 2027, initial guidance called for 6% adjusted operating income growth in constant currency, the note explained. But with diesel and freight costs spiking, management is likely to hold the line for now. 

Morgan Stanley expects Q2 guidance to imply sequential acceleration, partly because a roughly $450 million general liability claims expense that hit Q2 of fiscal 2026 won’t repeat, removing a nearly six-point headwind to operating income growth, according to the note.

Why Morgan Stanley thinks Walmart deserves a premium valuation

Walmart trades at roughly 43 times next-12-months price-to-earnings (P/E), about 21 times above its 10-year historical average, according to the Morgan Stanley note. That’s an eyebrow-raising number.

Morgan Stanley’s answer? Walmart isn’t the same company it was a decade ago. Its $140 price target is based on roughly 44 times blended P/E on fiscal 2028 EPS estimates of $3.19. The firm’s bull and bear scenarios imply 31% upside and 23% downside from current levels ($130.43 when Morgan Stanley released the report).

The argument is straightforward. Walmart went from a retailer being disrupted by Amazon (AMZN) to an e-commerce and supply chain disruptor in its own right. In a market rewarding durable compounders with defensive qualities, that repositioning justifies a premium, at least in Morgan Stanley’s view.

Related: Walmart announces unique strategy to drive sales

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