Parkev Tatevosian, CFA on $WMT (Oct 28, 2026)

I saw some interesting news for Walmart stock investors this morning, as the company aims to merge its Walmart Plus subscription service and Sam's Club.

I think this is an interesting move by Walmart as it makes an offensive to try to gain market share in the membership-based warehouse shopping category. So, I will share with you the details of this announcement and my updated and revised estimate of what I believe Walmart's stock price is worth, my fair value estimate, and whether I believe this is a buying opportunity at current market prices.

So, Walmart now offers Walmart Plus and Sam's Club Plus for $120 per year plus tax. I think these are comparable memberships: Costco's Executive Membership and Walmart's Sam's Club Plus.

Now you can get Walmart Plus plus Sam's Club. They are not the same thing, are they? If you shop at both places, you'll know that Walmart has a greater variety and a larger range of products, while Sam's Club has a more limited selection and less variety, similar to Costco.

And now if you are a member of Sam's Club, you will also get this additional benefit from Walmart. It is important to note that this is only available if you purchase the annual plan and do not choose the monthly plan.

So, of course, this comes amid a deteriorating overall economic situation for consumers, and Walmart is aware of that, isn't it?

Therefore, Walmart is aware of this and is trying to enhance its competitive advantage, which is being the lowest-cost provider. They are the company that offers the lowest-priced options to consumers, and they want to embody that.

They want to focus on that more. They want to highlight this to consumers,

But when your budget is limited, and you're looking to maximize the value of your money, Walmart is a destination that attracts many customers, and they've highlighted that too.

However, they are still facing difficulties, as sales growth at existing stores was the slowest in their most recent completed quarter since 2020. It rose by only 2.6%.

Walmart has done an exceptional job of gaining market share, especially in e-commerce. And a salute to the management team and to what Walmart has been able to achieve since approximately 2017.

Their performance was absolutely amazing. I mean, it's unbelievable. I can't adequately describe the excellent work Walmart has done to recover,

you know, between 2010 and 2016, I would say they lost a lot of their market share. Amazon was rapidly gaining market share, and there were estimates and predictions that Walmart would go out of business.

This is how bad things got for Walmart between 2015 and 2016.

Things were going in the wrong direction completely. They were hesitant to invest in their online business because they told themselves, "When someone shops online, it's not as profitable for us as when they come to our store and shop."

It costs us less because we don't have to deliver things to their homes. And when they are in our stores, they make more impulse purchases. Therefore, we do not want to go online.

For example, no. "No, thank you." They hesitated and allowed Amazon to gain a significant market share.

Then finally, they said, "Oh, wait a minute." We can't let this continue." They finally changed course and invested in e-commerce. And those investments are working extremely well.

Investors are rewarding Walmart. Its stock is now trading at a forward P/E ratio of 36.5, which is even more expensive than Amazon today. That would have been unimaginable 10 years ago.

But even measured on a discounted cash flow basis, Walmart stock looks expensive. Doesn't it? It's trading at $118, and I've calculated a fair value of $69. Walmart stock looks overvalued by about 40% here, even at these levels.

So, this move by Walmart is undeniably interesting. I think it will lead to significant consumer adoption. I think it's great value for customers.

I think unless there are specific reasons why you need Costco for items other than groceries, I think Walmart and Sam's Club, if they're in your area, are obvious choices that outperform Costco.

I definitely prefer Walmart. Sam's Club is definitely better than Costco for my shopping experience.

So, I'm optimistic that this will be successful for Walmart, but for investors, I'd wait before buying Walmart stock. I wouldn't buy Walmart stock at these high levels.

So, again, I don't think this is a buying opportunity. I'll reiterate my "hold" rating, but I'm downgrading my rating, aren't I? Lately, I've felt quite convinced that a "hold" rating would be good for long-term investors—that if you hold Walmart stock for the next 10 years, you might get a reasonable return—but I'm starting to lose faith in that too.

Well, I'm downgrading this rating to average, and it's approaching a level that might lead me to downgrade Walmart stock to "sell" due to overvaluation. We're not there yet, but we're getting close at these valuations.

In my opinion, it's closer to "sell" than "buy."