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Contrarian Opinion: Tariffs, Inflation, and Recession Fears Could Be a Tailwind for This Retail Stock and Propel It to a $1 Trillion Valuation
WMTWalmart(WMT) The Motley Fool·2025-04-26 13:45

Core Viewpoint - The article discusses the potential impact of new tariffs on consumer prices and economic growth, highlighting Walmart's unique position to benefit from these changes and its potential to reach a 1trillionmarketcapitalization.Group1:MarketContext−PresidentTrump′snewtariffscouldleadtorisingpricesforconsumersandaslowdownineconomicgrowth[1]−Currently,thereareonlysevenpubliccompanieswithamarketcapitalizationexceeding1 trillion market capitalization. Group 1: Market Context - President Trump's new tariffs could lead to rising prices for consumers and a slowdown in economic growth [1] - Currently, there are only seven public companies with a market capitalization exceeding 1 trillion, including Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Berkshire Hathaway [1][2] - The next largest companies by market cap are Broadcom, Tesla, and Taiwan Semiconductor Manufacturing, with Walmart being the most valuable non-technology company at approximately 760billion[2]Group2:Walmart′sPositioning−Walmart′sbusinessmodeliswell−suitedforeconomicdownturns,ascost−consciousconsumerstendtofavoritslowpricesduringperiodsofinflationoruncertainty[6]−Walmarthassuccessfullycomplementeditsphysicalstoreswithane−commerceplatform,providingmultiplerevenuestreams[11]−Inthefourthquarteroffiscal2025,Walmartreportedsame−storesalesgrowthof4.6760 billion [2] Group 2: Walmart's Positioning - Walmart's business model is well-suited for economic downturns, as cost-conscious consumers tend to favor its low prices during periods of inflation or uncertainty [6] - Walmart has successfully complemented its physical stores with an e-commerce platform, providing multiple revenue streams [11] - In the fourth quarter of fiscal 2025, Walmart reported same-store sales growth of 4.6%, with transaction volumes and average ticket sizes also increasing [12] Group 3: Financial Performance - Following the COVID-19 recession, Walmart's revenue and gross profit have steadily increased, even as inflation peaked at around 9% in mid-2022 [10][13] - For the fiscal year ending January 31, Walmart's earnings per share (EPS) were 2.42, with a current share price of 95,resultinginaprice−to−earnings(P/E)ratioofapproximately39[16]−Toreacha95, resulting in a price-to-earnings (P/E) ratio of approximately 39 [16] - To reach a 1 trillion market cap, Walmart's stock would need to increase by about 32%, implying a share price of around 125[16]Group4:FutureOutlook−Assuminga15125 [16] Group 4: Future Outlook - Assuming a 15% growth in both EPS and P/E ratio, Walmart could achieve a future share price of about 126, placing it above a trillion-dollar market cap [17] - The potential for Walmart to be viewed as a more essential player in retail could lead to a premium multiple being applied to its stock [18] - There is cautious optimism that Walmart could join the trillion-dollar club sooner rather than later, making it an attractive investment opportunity amid economic uncertainties [19]