Should You Buy Walmart Stock Before Feb. 19?

On Feb. 19, Walmart (NASDAQ: WMT), the world's largest retailer, reports its fiscal fourth-quarter and full-year earnings, and investors may be wondering if the stock is a buy before the report.

It's true that a stock may pop after earnings are released, particularly if numbers beat expectations. On the other hand, a stock can lose value if the report or outlook disappoints investors.

Of course, investors should look beyond the next earnings report when assessing a stock, but buying just before a catalyst can be a good strategy. However, in the case of Walmart stock, which has been on a tear, it may not be the right move. Let's examine why investors may want to hold off on buying shares of Walmart.

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Walmart just hit an all-time high

Walmart stock has been on a tear as of late, rising roughly 20% year-to-date to a split-adjusted all-time high. Over the past 12 months it has gained nearly 29%.

In recent days, the stock has been nudged higher by upgrades from several analysts who raised price targets. Analysts at Oppenheimer noted expectations for a strong fourth-quarter holiday sales period, expecting sales to come in at the high end of Walmart's projected growth range of 3.75% to 4.75%.

Walmart's success over the past couple of years has been based on its pivot to reach a broader clientele. It has traditionally been a discount retailer catering to budget-conscious consumers, which has allowed it to perform well in downturns as people look for better deals.

While maintaining its traditional client base, it has successfully attracted higher-income shoppers with the convenience of online and store pick-up offerings, modernized stores, and a broader selection of brands, among other changes. That has allowed it to eat into the profit and market share of big-box rival Target, which has seen year-over-year earnings declines over the past year.

Is Walmart stock a buy ahead of earnings?

Earlier this month, Walmart reached a $1 trillion market cap. It is just the 12th company to reach that milestone. In addition to beefing up its business, it has benefited from investors' rotation away from overvalued tech stocks into consumer staples and more all-weather stocks.

However, this has all contributed to Walmart stock itself being overvalued, trading at 45 times earnings. That is the highest it's been since 2021.

I think Walmart is a great stock and certainly a hold. But I'd probably hold off on buying shares as it seems to be riding the momentum of recent catalysts, which have inflated its high valuation even higher.

The stock will likely dip at some point; it may even be after earnings if the outlook does not jibe with the high valuation. And even if the report is as strong as expected, there will likely be some profit-taking. It might be good to let the dust settle a bit and look for a better opportunity to buy.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.