Walmart (WMT) Is Becoming More Than a Retailer — But Is the Stock Too Expensive?

Walmart Inc.’s (NASDAQ:WMT) growth narrative is moving away from reliance on low-margin sales volume. The company delivered 24% year-over-year growth in its U.S. e-commerce sales during the second quarter of fiscal 2027. It saw the Connect’s ad segment revenues increase by 43% excluding VIZIO numbers, while the U.S. membership segment exhibited double-digit growth. Strength across these segments bolsters the company’s position as it scales up its digital operations, which would lead to accelerated bottom-line growth in the future.

Lets also look at whether Walmart’s digital transformation strategy has reaped any benefits.

A New Delivery Playbook

Walmart is scaling up its restaurant delivery segment by teaming up with brands like Dunkin’ and Papa John’s. Its recent engagement with the latter would allow customers across certain U.S. markets to place orders directly from the company’s website or mobile app. Initial launch is scheduled in autumn this year, which will be followed by a rollout to bring thousands of Papa John’s stores within its network.

Management is leveraging its existing assets rather than building a delivery system from scratch. With stores located within 10 miles of approximately 90% of the U.S. population and an established last-mile delivery network.

Walmart’s momentum extends across advertising, membership programs and online retail channels, which collectively offer a strong potential. The company now operates beyond the concept of a typical retail chain. It brings together an online marketplace, extensive network of physical stores, an advertising segment, and a membership program, all of which complement each other. Here is how Walmart compares with Ulta on beauty, health, and wellness offerings.

The Case Against Digital Transformation

On the restaurant delivery front, rivals such as DoorDash and Uber Eats pose a competitive threat, as they could keep demand away from Walmart. It also faces mounting cost pressures, with management now expecting more than $2 billion of incremental fuel-related costs this year above its original guidance assumptions.

Given these swollen fuel costs, along with rising inventory levels, skeptics argue Walmart’s central challenge is delivering strong profit growth. Should revenue growth weaken without a corresponding boost to margins, investors may turn reluctant to pay a currently high premium valuation for the shares.

See how Walmart is expanding store-fulfilled delivery as demand for convenience grows.

Stretched Valuation Despite Lagging Returns

Walmart closed at $104.26 on October 1, resulting in -6.42% returns on year-to-date basis. Compared to S&P 500’s 13.93% rally during the last 52 weeks, the retail giant has delivered just 2.18%. It failed to keep pace with the broader market, but its inflated valuation multiples indicate that investors are still paying a premium for the stock.

The stock currently trades at a 40.05x trailing price-to-earnings multiple. It offers very little gap from its forward P/E of 38.02x, implying very modest earnings growth expectations for the company. Additionally, it is worth mentioning that for a low-margin retail business, such multiples are quite high as they are generally associated with high-growth technology names.

Institutional Sentiment

Institutional data tracked by Insider Monkey, covering more than 1,000 hedge funds, shows that sentiment toward Walmart remains strong. According to 13F filing data, number of smart-money managers with long-term exposure in the stock has been going up. A total of 111 hedge funds held positions by the end of Q2 2026, compared to 99 in Q1 2026. Short interest sits at 1.08%, indicating very nominal amount of speculative bets against the stock.

BlackRock is the largest institutional stakeholder, as per Yahoo Finance database, holding 354.2 million shares as of June 30. This amounts to 4.44% of outstanding shares. Other notable institutional investors include Vanguard Capital Management and State Street Corporation, holding 3.59% and 2.36% of outstanding shares respectively.

Verdict

Despite the above-mentioned risks, the delivery expansion efforts do offer strategic benefits beyond revenue expansion. They offer Walmart another avenue for building customer loyalty. This approach would also allow the company to tap its enormous customer base for cross-selling opportunities. However, with Walmart trading around 40x trailing earnings, investors are already paying a substantial premium for these newer growth engines to translate into stronger profit growth.

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