Walmart (NASDAQ:WMT) closed down 3.7% on Thursday, placing it among the weakest-performing components of the Dow Jones Industrial Average as an analyst downgrade coincided with a broad market selloff.
Erste Group's Hans Engel moved his recommendation on Walmart from Buy to Hold, pointing to valuation as the primary concern despite the company's recent operational momentum. Engel acknowledged that Walmart expanded both sales and profit in the fourth quarter and reiterated management's guidance for the current fiscal year.
Engel highlighted an outlook that includes sales growth of around +4% and an operating profit increase of around +7% for the current fiscal year, with earnings per share expected in a range of about USD 2.75 to 2.85. He noted that while the growth trajectory is moderate and positive, the stock's projected price-to-earnings ratio is considerably higher than the peer group average, and therefore he does not expect Walmart to outperform the sector index in the medium term.
The downgrade arrived as the broader market moved lower on concerns tied to an intensifying Middle East conflict, which by Thursday had entered its sixth day. That geopolitical development pushed oil prices higher, contributing to investor anxiety over inflation and fueling questions about whether and when the Federal Reserve will be able to cut interest rates.
Within equities, the S&P 500 Consumer Staples Index recorded its worst intraday performance since April 21, sinking as much as 2.2% during the session. Several well-known consumer goods and retail names were among the decliners named in market reports, including Dollar General, Philip Morris, Costco and Procter & Gamble. The Dow Jones Industrial Average also suffered, falling by more than 2% on the day.
The combination of a high relative valuation for Walmart and the heightened macroeconomic and geopolitical uncertainty provided the backdrop for the stock's underperformance on Thursday. Market participants cited worries about persistent inflationary pressure and the impact that sustained higher oil costs could have on consumer spending and margins across staples and retail categories.
Looking ahead, investors tracking Walmart will likely weigh the company's modest growth outlook and Q4 profit gains against the elevated P/E relative to peers, while monitoring broader market developments tied to the regional conflict and interest-rate expectations.