Morgan Stanley resets Walmart forecast on high inflation

Walmart (WMT) had a unsmooth Thursday. The banal dropped astir 7.3% connected May 21, 2026, closing astatine $121.34 aft a cautious second-quarter outlook overshadowed different coagulated first-quarter results, CNBC reports.

The selloff dragged shares much than 10% beneath their 52-week high, but Morgan Stanley isn't flinching.

In a enactment dated May 22, 2026, analysts Simeon Gutman and Pedro Gil reiterated their Overweight standing connected WMT and held the firm's $140 terms people steady, implying astir 15% upside from existent levels.

The timing matters. U.S. ostentation jumped to 3.8% successful April, the highest speechmaking since May 2023, the Bureau of Labor Statistics reported. Energy and nutrient costs led the surge, and that's precisely the situation Walmart was built to win.

Why Morgan Stanley is leaning into Walmart amid a 3.8% ostentation backdrop

Morgan Stanley's thesis hinges connected what it calls Walmart's "eCommerce flywheel," a self-reinforcing loop of online sales, advertising, and rank income.

All 3 legs are firing successful the archetypal quarter.

• Online sales: astir +25% twelvemonth implicit year

• Walmart Connect (advertising): +44%

• Walmart+ membership income: ~+28%

• Marketplace gross merchandise value: ~+50%

The flywheel generated a grounds ~$1.1 cardinal successful quarterly operating nett for Walmart U.S., per the Morgan Stanley note.

Incremental operating margins connected that premix held astatine astir 12%, with higher-margin advertizing and rank offsetting losses inactive bleeding from online fulfillment.

Walmart's astir profitable gross streams are besides its fastest-growing.

How Walmart is utilizing ostentation to widen its market moat

Here's the cue Morgan Stanley keeps pointing to.

Walmart U.S.'s like-for-like market ostentation ran conscionable +0.6% twelvemonth implicit twelvemonth successful Q1 versus +2.5% for the broader Food-at-Home Consumer Price Index, per the note. That's astir 190 ground points (bps) of separation, and it widened sequentially.

In plain English: Walmart is keeping its prices down portion the remainder of the market manufacture passes ostentation done to shoppers.

Related: Morgan Stanley resets PANW banal terms people connected request trends

This is the trade-down dynamic TheStreet flagged earlier earnings, and it's accelerating. Higher-income households earning much than $100,000 a twelvemonth present thrust the bulk of Walmart's marketplace stock gains.

Beef prices climbed 14.8% implicit the past year, and gasoline jumped 28.4%, CNBC reports. When a vessel of state and a lb of crushed chuck some determination that hard, even higher earners hunt for value.

What the gross borderline numbers really archer investors

On paper, Walmart U.S. gross borderline hardly budged twelvemonth implicit year, ticking up lone slightly. But that's not the afloat story.