Shares of mega-retailer Walmart Inc. (WMT) are down 119% over the past year and 16.6% year-to-date to close yesterday’s trading session at $120.69. The recent price decline can be attributed to the company’s poor first-quarter results.

WMT’s operating income declined 23% year-over-year to $5.3 billion due to unfavorable economic conditions. The overall retail industry has been impacted severely by rising inflation, constrained inventories, and labor shortages.

However, Baird analyst Peter Benedict reaffirmed a Buy rating for the WMT stock and set a price target of $155, implying a 29.8% potential upside from the current level. The analyst believes “WMT is investing from a position of strength, and the step-up in capex should extend WMT’s omnichannel leadership in the marketplace and fuel faster (and more profitable) growth over the intermediate/long-term.”

Here's what could shape WMT's performance in the near term:

Strategic Partnership

Last month, Symbotic LLC, a game-changing artificial intelligence-powered supply chain technology startup, and WMT announced an expanded commercial partnership to integrate Symbotic's robotics and software automation platform in all 42 of Walmart's regional distribution facilities over the next several years. This builds on Walmart's pledge to install Symbotic Systems in 25 regional distribution centers.

Impressive Growth Prospects

Street expects WMT's revenues and EPS to rise 3.4% and 8.6% year-over-year to $616.02 billion and $6.97, respectively, in fiscal 2024. In addition, WMT's EPS is expected to rise at a 9.5% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in three of the trailing four quarters.

Discounted Valuation

In terms of forward Price/Cash Flow, the stock is currently trading at 10.69x, 17% lower than the industry average of 12.88x. Also, its forward EV/Sales of 0.68x is 62.9% lower than the industry average of 1.82x. Moreover, WMT's forward Price/Sales of 0.56x is 53.9% lower than the industry average of 1.21x.

Consensus Rating and Price Target Indicate Potential Upside

Of the 27 Wall Street analysts that rated WMT, 22 rated it Buy, and five rated it Hold. The 12-month median price target of $157.27 indicates a 30.3% potential upside. The price targets range from a low of $134.00 to a high of $181.00.

POWR Ratings Reflect Solid Prospects

WMT has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. WMT has a B grade for Stability which is justified given the stock beta of 0.51.

Of the 38 stocks in the A-rated Grocery/Big Box Retailers industry, WMT is ranked #13.

Beyond what I stated above, we have graded WMT for Sentiment, Growth, Quality, Value, and Momentum. Get all WMT ratings here.

Bottom Line

WMT's expanding online presence and diverse strategic alliances should boost its operational performance. Because new consumer behaviors related to online purchasing are expected to endure, the firm is well-positioned to serve its expanding client base and promote commercial growth. Furthermore, given the favorable analysts' sentiment and the company's solid growth prospects, we think the stock could be a solid investment now.

How Does Walmart (WMT) Stack Up Against its Peers?

WMT has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with an A (Strong Buy) rating: Natural Grocers by Vitamin Cottage Inc. (NGVC), Ingles Markets Inc. (IMKTA), and Albertsons Companies Inc. (ACI).

WMT shares rose $0.33 (+0.27%) in premarket trading Thursday. Year-to-date, WMT has declined -15.73%, versus a -20.26% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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