Where Will Walmart Stock Be in 5 Years?

Retail has consistently been an industry you can count on long term, but it has always had its ups and downs along the way. And regardless of the state of the retail industry, one company has been a key force in it over the past six decades: Walmart (NYSE: WMT).

Walmart has been on an impressive run over the past five years, up 126% in that span, outperforming the S&P 500's 86% gain. The traditionally low-cost brick-and-mortar giant has been adjusting to new consumer preferences, while also staying true to its core business model.

The combination of the two has worked in its favor and should spark optimism about its future. Nobody can predict how a stock will perform, but Walmart's business is surely headed in the right direction and should be even more thorough five years from now.

Image source: Walmart.

Going beyond brick-and-mortar

There aren't many places in the U.S. where you can't get to a Walmart within a reasonable amount of time. It built its brand on being the low-cost retailer that served even some of the more rural parts of the country.

However, Walmart's business took a major hit with the emergence of Amazon and its e-commerce business. Consumers no longer needed to leave their houses for most items because Amazon would deliver them within two days, hassle-free. Now, Walmart is making a push to grab a slice of the e-commerce pie.

Walmart+, which is similar to Amazon's Prime, is shaping up to be a success. It has many perks, but a key selling point is its fast delivery. Walmart says it can offer same-day delivery in many cases (using its stores as de facto fulfillment centers) and next-day and two-day shipping in virtually every other situation.

Consumers flocked to Amazon for its convenience, and now Walmart is providing that same convenience. And in many cases, Walmart is even more convenient because consumers can pick up orders in a physical store faster or handle in-person returns.

Five years from now, I expect Walmart's e-commerce business to drive a lot of Walmart's retail growth.

Embracing a fast-growing profit machine

Retail sales aside, Walmart is leaning into what few companies can compete with: its data. Walmart has decades of data at its disposal that it has been using to build an impressive advertising business with Walmart Connect. Walmart Connect enables advertisers to reach consumers when they're searching and making purchases.

With Walmart's scale, reach, and data, it has a great value proposition that most smaller retailers or other digital platforms can't match.

In its fiscal third quarter (ended Oct. 31), Walmart's revenue increased 5.8% to $179.5 billion, but its advertising business grew much faster. Global advertising was up 53% (including VIZIO, which it acquired in December 2024), and Walmart Connect in the U.S. was up 33%. Internationally, advertising increased by 34%.

WMT Revenue (Quarterly) data by YCharts

Digital advertising is a high-margin business, especially compared to retail, because once the platform is built, there's virtually no cost to each additional ad placed. Over the next five years, I expect advertising to be a significant portion of Walmart's operating income (profit from core operations).

Is Walmart a buy right now?

The very short answer to whether or not Walmart is a buy right now is "yes." It has a reliable dividend (52 years of consecutive increases, making it a Dividend King); it caters to customers of all budgets, helping it sustain through economic ups and downs; it is adjusting its business to adapt to the times; and it has high-growth areas that are in their earliest stages.

One thing potential investors should keep in mind, though, is Walmart's current valuation. Trading at 43 times its projected earnings over the next 12 months, Walmart's stock is far from cheap. It's definitely more expensive than almost all of its direct competitors.

WMT PE Ratio (Forward) data by YCharts

A high valuation doesn't take away from Walmart's standing as a buy in my eyes; it just means investors should know that Walmart is now seemingly being priced as a retail/technology hybrid and not just your regular ol' retail store. That said, if I had to bet, I would think Walmart continues to outperform the market over the next five years.

Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.