Walmart Stock Shows Technical Strength Amid High Valuation and Potential Pullback Risks

Technical Analysis

Walmart Inc. (WMT) closed at $99.98 on June 3, 2025, up 0.21% with intraday price action ranging between $98.59 and $100.89. The stock hovers near its 52-week high of $105.30, demonstrating relative strength. The 14-day RSI at 69 signals a near-overbought condition, cautioning for a possible short-term pullback or consolidation, though momentum remains positive. The MACD is mild but positive at 0.32 over three months, indicating moderate bullish momentum. Price remains comfortably above both the 50-day ($93.69) and 200-day ($89.18) moving averages, confirming a sustained uptrend. Average true range (ATR) of $2.06 suggests moderate volatility. Volume at 15.58 million falls below the 22.57 million average, pointing to a quieter trading day but with potential for volume to pick up around critical price levels. Technical support is robust near $96.35, aligning closely with the stop-loss level of $96.36, providing a clear risk boundary for short-term traders. No defined resistance is currently noted until the 52-week high zone near $105.

For the next trading day (June 4), given the technical strength and recent minor price increase, the stock is likely to sustain or modestly advance but with increased vigilance for a pullback due to RSI nearing overbought territory. Over the upcoming week, the technical setup favors a continuation of the current upward trend barring broader market disruptions, with an expected trading range between $97 and $103.

Fundamental Analysis

Walmart’s market capitalization stands at approximately $800 billion, reflecting its dominant position in the retail sector. With a trailing twelve months (TTM) EPS of $2.34 and a P/E ratio of 42.73, valuation appears elevated compared to historical averages but may be justified by robust growth prospects and stable cash flows. The dividend yield based on TTM is 0.89%, indicating modest income generation relative to the share price, consistent with a growth-oriented retail giant.

The discounted cash flow (DCF) valuation shows an intrinsic value of roughly $48.06, markedly lower than the current market price, suggesting the stock trades at a premium to intrinsic value. This premium likely factors in expectations of continued market dominance, operational efficiencies, and growth in non-traditional revenue streams, exemplified by recent partnerships such as integrating Wienerschnitzel restaurants in Walmart stores to enhance customer experience and drive additional foot traffic. Expansion initiatives including planned store openings and a new Sam’s Club reinforce Walmart’s growth narrative.

Industry trends signal ongoing pressure on consumer grocery budgets, increasing demand for value-oriented retailers like Walmart. The company’s strong brand, scale, and innovation in merchandising position it well against inflationary pressures and competitive challenges. However, the relatively high P/E and premium pricing imply expectations of future earnings growth, with the next earnings announcement due August 21, 2025, likely to be a key catalyst.

Intrinsic Value and Long-Term Investment Potential

The significant discrepancy between DCF intrinsic value and current market price indicates the market is pricing in substantial growth and operational resilience beyond current fundamentals. Walmart’s entrenched market share, diversified revenue streams, and strategic innovations support a positive long-term outlook. However, the premium valuation imposes risk if earnings growth disappoints or economic headwinds persist. The company's dividend yield, while modest, adds to total shareholder return over time. For long-term investors, Walmart offers solid fundamentals, stable cash flow, and defensive qualities within the retail sector, but at a valuation that commands justified confidence in continued execution.

Overall Evaluation

Walmart embodies a strong 'Hold' candidate based on the current assessment. The stock shows technical strength and growth potential, supported by solid fundamentals and strategic expansions. However, the elevated P/E ratio and premium to intrinsic value suggest caution against aggressive accumulation at current levels. Near-term price volatility may increase given the overbought RSI, and reliance on future earnings to justify valuation is critical. Investors with a medium to long-term horizon might maintain existing exposure while monitoring upcoming earnings and broader market conditions.