Why Walmart Stock May Drop Soon

January 13th, 2026 by Trefis Team
-8.55%
Downside
118
Market
108
Trefis
WMT: Walmart logo
WMT
Walmart

Walmart (WMT) is facing threats. Even the biggest names aren’t invincible. Stocks can drop sharply without warning – wiping out months or years of gains in a matter of weeks. History shows that sudden market swings can hit any company, no matter how dominant it seems.

Specifically, we see these risks:

  1. Aggressive Sales Pull-Forward Masking Demand Slowdown
  2. Margin Erosion from Sustained Price War
  3. Weakening Consumer Health in Core U.S. Market

Risk 1: Aggressive Sales Pull-Forward Masking Demand Slowdown

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  • Details: Potential for significant revenue miss in upcoming quarters, Valuation de-rate on slowing growth narrative,
  • Segment Affected: Walmart U.S.
  • Potential Timeline: Next 1-2 Quarters
  • Evidence: Receivables growth of 20.68% massively outpacing revenue growth of 5.8% (Q3 2025), Divergence suggests potential channel stuffing or relaxed credit terms to hit sales targets,

Risk 2: Margin Erosion from Sustained Price War

  • Details: Gross margin compression below expectations, EPS guidance miss leading to analyst downgrades,
  • Segment Affected: Walmart U.S. Grocery and General Merchandise
  • Potential Timeline: Immediate and ongoing through 2026
  • Evidence: Competitor Target citing “higher markdowns” and pressure from WMT (Nov 2025), Analyst commentary on WMT taking market share via aggressive pricing (Nov 2025),

Risk 3: Weakening Consumer Health in Core U.S. Market

  • Details: Negative comparable sales growth in the U.S. segment, Forced to increase promotional activity, further pressuring margins,
  • Segment Affected: Walmart U.S.
  • Potential Timeline: Q4 2025 and into 2026
  • Evidence: WMT noted a pullback from lower-income consumers late in the last reported quarter (Q3 2025 Earnings Call), Increased focus on value offerings signals a defensive posture against a weakening consumer (Nov 2025),

What Is The Worst That Could Happen?

Looking at Walmart’s risk during major market shocks shows it’s not immune. It fell 38% in the Dot-Com crash, 26% in the Global Financial Crisis, and 26% again during the Inflation Shock. Even 2018’s correction and the Covid dip led to declines over 13%, showing downside risk remains.

Is Risk Showing Up In Financials Yet?

  • Revenue Growth: 4.3% LTM and 5.4% last 3-year average.
  • Cash Generation: Nearly 2.2% free cash flow margin and 4.1% operating margin LTM.
  • Valuation: Walmart stock trades at a P/E multiple of 41.1

  WMT S&P Median
Sector Consumer Staples –
Industry Consumer Staples Merchandise Retail –
PE Ratio 41.1 24.1
   
LTM* Revenue Growth 4.3% 6.4%
3Y Average Annual Revenue Growth 5.4% 5.7%
   
LTM* Operating Margin 4.1% 18.8%
3Y Average Operating Margin 4.1% 18.4%
LTM* Free Cash Flow Margin 2.2% 13.5%

*LTM: Last Twelve Months

If you want more details, read Buy or Sell WMT Stock.

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