Why Walmart’s (WMT) Defensive Appeal Comes at a Steep Price

TipRanks

Sat, Apr 12, 2025, 5:11 AM 7 min read

Defensive stocks like Walmart Inc. (WMT) are often a go-to when markets flip upside down. With its low beta and stable dividend, Walmart has historically performed well during periods of fear, uncertainty, and doubt. In a gung-ho political environment full of geopolitical landmines, being recession-proof is often not enough.

• Discover outperforming stocks and invest smarter with Top Smart Score Stocks.

• Filter, analyze, and streamline your search for investment opportunities using Tipranks' Stock Screener.

In recent years, the retail king has reaped the rewards—growing its market share and attracting a wider range of consumers across different income levels. Naturally, that’s caught the attention of investors, many of whom are now willing to pay a higher premium for a business that combines defensive qualities with steady growth for a company of its size.

Even with the specter of tariffs—especially those targeting China—Walmart may take a hit on the demand side, but it’s still likely to be better positioned than most of its peers. As consumer spending continues to lean more toward affordability, Walmart stands to benefit like a bear waiting for a salmon run.

While these competitive advantages are real, a closer look at the valuation tells a different story. At current price levels, there just isn’t much of a margin of safety to confidently go long on Walmart right now. Because of that, I’m maintaining a Hold rating on the stock.

The big topic shaking up the global economy right now—Trump’s reciprocal tariffs—has stirred up a wave of uncertainty across the stock market. Obviously, global retailers like Walmart, with their huge and complex supply chains, aren’t going to come out of this untouched. One of Walmart’s biggest competitive advantages has always been its supplier network. It leverages volume to offer low-cost goods and undercuts the competition on price.

But here’s the problem: a big chunk of that supplier network is outside the U.S., and a lot of it is based in China—the main target of Trump’s tariffs. As of the latest update from the White House, those tariffs are now sitting at a whopping 145%. So, Walmart will inevitably be hit with significant import costs moving forward. And there’s really no way around it. Since Walmart runs on thin margins and needs to stay competitive, it’ll have to pass those higher costs onto shoppers. That’s likely to lead to weaker demand and declining same-store sales.

The silver lining—if we can call it that—is that these tariffs affect everyone. Walmart’s competitors might not have the same scale or pricing power to absorb the hit. So, while the whole sector takes a blow, Walmart could still come out relatively stronger simply because it’s better positioned to offer lower prices than most. When a tide sinks all boats, the strongest appear more float-worthy.