Martin Bradstreet
Investor & Programmer, Former Poker Player
Walmart works only as a funding short, best paired against a long in Amazon. Over 10 years Walmart will obviously outperform T-bills, since its return on capital and market positioning are too good. Shorting it doesn't really derisk a long, and in a recession the pair would probably do worse than simply buying Amazon with debt. x.comÂ
Walmart is arguably more exposed than its safe-haven history suggests, because its edge rests on competing with Amazon, and doing that clearly will require far more capital. Historically it has been a place to hide, but that does not mean owning or shorting it; it is simply a stock to avoid. x.com x.comÂ
Walmart's valuation looks like a bubble about to pop: investors pay 37x earnings for 6% revenue growth. Amazon is a more direct comparison and is way cheaper with roughly three times faster growth. x.com x.comÂ
Walmart keeps compounding through recessions because people never stop eating in bad years; they buy more chicken and less filet, and Walmart sells the chicken. It compounded through the 2001, 2008 and 2020 recessions. Wealth comes from finding a business that never has a truly bad year, not from moonshots. x.comÂ
Amazon's unusual long-term AWS guidance looks desperate and leaves its stock looking dead. @P_Remarks says Amazon normally avoids long-term guidance and speculates that its projection of over 40% AWS revenue growth in both 2027 and 2028 was a Hail Mary to offset a quarter weak relative to expectations. x.comÂ
Costco and Walmart's valuations have diverged from most US food and beverage stocks. Most of the group trades near 20-year valuation lows, while these two have entered a mini-bubble. x.comÂ
Discount retailers are a built-in recession hedge because consumers trade down rather than stop spending. Walmart, Costco, TJX, and Dollar General should benefit as worsening economic conditions send more shoppers through their doors. x.comÂ
Walmart's 43.28x earnings multiple makes the stock impossible to buy for a long time. Its historical median is 31.13x, and even at 30x it would not be attractive. x.comÂ
The 10-year Treasury's 5.25% yield makes roughly 3% earnings yields hard to accept for Walmart, Costco, Republic Services and Cintas, given their single-digit EPS growth. These low-growth safe havens have looked overpriced for a while, especially after the recent surge in yields. x.comÂ
Walmart has the strongest fundamentals in retail, with $725B+ of revenue, exploding e-commerce and market-share gains while rivals bleed. It is a defensive cash-printing machine in a shaky economy, and analysts rate it a moderate buy with $140+ targets. x.comÂ
Walmart's valuation is too high for a grocery and household retailer. At about 36 times next year's earnings, it exceeds its five-year norm of 25 and the roughly 20 times this business should command; Target trades near 16 times. Stay away from Walmart here. x.comÂ
