Walmart Is Getting Slammed Today. Should You Sell WMT Stock Along With Target and Costco?

Walmart shares dropped 7% in midday trading after quarterly results were released before the open. The move affected big-box retail peers, with Costco down 2% and Target up 2% after a sharp decline the prior day. The sell-off follows a strong run, with Walmart up 18% year to date through Wednesday’s close at $130.85. Longer-term momentum remains positive, including 35% one-year gains and 195% five-year gains for Walmart, while Costco and Target also show gains over shorter periods but Target lags over five years. The negative reaction is tied to the earnings package and a high valuation, with Walmart trading at a 49x P/E and limited cushion if expectations shift.

"Shares of Walmart ( NYSE:WMT | WMT Price Prediction) are down 7% in midday trading Thursday, a striking move for a defensive mega-cap that just reported quarterly results before the open. The reaction has dragged on peers, though not uniformly. Costco Wholesale ( NASDAQ:COST) is off 2%, while Target ( NYSE:TGT) is actually bouncing 2% after its own sharp drop on Wednesday."

"The honest answer requires a step back from the tape. Walmart shares had climbed 18% year to date through Wednesday's close at $130.85, so today's reset comes from a fairly high base. Thus, the context should be considered before anyone touches the sell button on WMT stock."

"Across time frames, all three names entered Thursday with healthy momentum. Walmart was up 35% over one year and 195% over five years. Target carried a 28% year-to-date gain, and Costco was up 25% year to date. The five-year picture sharpens the story. Costco stock has returned 177% versus 158% for Walmart's, while Target is the structural laggard at -44% over five years."

"Walmart reported its earnings before the open, and the market is reacting negatively to the package as a whole. The market's verdict is clear in the price. A 7% single-day drop is unusual for a name with WMT stock's defensive profile. The valuation backdrop magnifies the move. Walmart trades at a P/E ratio of 49x, which leaves little cushion when the post-report narrative shifts even slightly."

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