The retail industry is expanding rapidly around the world, driven by evolving consumer behaviors, technological advancements, and economic trends. While challenges such as inflation, supply chain disruptions, and competition persist, the sector continues to grow in new ways. Walmart and Target have cemented their positions in the retail industry and are fierce competitors.
Walmart (WMT) is the world's largest retailer by revenue, with over 10,500 stores in 19 countries and over 2.1 million employees, demonstrating its dominance in the retail sector. Its commitment to low prices, as well as its extensive network of stores, warehouses, and e-commerce platforms, have given it a competitive advantage.
Meanwhile, Target Corporation (TGT), another prominent name in the retail sector, operates over 2,000 stores nationwide. Target, best known for its distinctive red bullseye logo, is frequently praised for its innovative marketing, carefully curated product assortments, and omnichannel shopping experience.
While both are good stocks to invest in, one is the better choice. Let's take a look at their most recent quarterly results to see which option is better.
The Case For Walmart Stock
Walmart (WMT), as the world's largest retailer, has the financial capacity to evolve in order to maintain its market position. The company has been investing in artificial intelligence (AI), robotics, and automation to improve supply chain efficiency, lower costs, and improve customer experiences. These efforts were reflected in its recent third quarter of fiscal 2025 results that exceeded Wall Street’s expectations.
WMT stock is up 73.7% YTD, compared to the S&P 500 Index’s ($SPX) gain of 26.2%.
Walmart's physical retail presence remains unparalleled, with a store network that spans both rural and urban areas. Its "everyday low prices" strategy attracts price-conscious customers, resulting in consistent foot traffic.
Its revenue streams are diverse, with significant contributions from grocery sales, general merchandise, and e-commerce. This business diversification and stability have enabled it to pay and increase dividends for the past 51 years, earning the title of Dividend King. In February, WMT hiked its dividend by 9% to $0.83 per share.
Walmart has a forward dividend yield of 0.93%, while the consumer staples average is 1.89%. Its forward payout ratio of 30.12% suggests that current dividend payments are sustainable, with the potential for future increases.
In the company's most recent third quarter of fiscal 2025, revenue increased 5.5% to $169.6 billion, while adjusted earnings increased 13.7% to $0.58 per share.
Walmart has also made significant investments in e-commerce, leading to e-commerce sales increasing by 27% globally in the quarter.
While Walmart continues to expand and grow its business, it has also maintained a stable balance sheet, with a debt-to-equity ratio of 0.44. It reported $10 billion in cash and cash equivalents at the end of the quarter.
WMT also generated $6.2 billion in free cash flow, which supports its dividend payouts.
Analysts predict that Walmart's revenue and earnings will grow by 5.3% and 11.7%, respectively, in fiscal 2025. Revenue and earnings may rise by another 4.2% and 10.9% in fiscal 2026, respectively.
Valued at a market cap of $726.9 billion, Walmart is very close to entering the $1 trillion market capitalization club. Jim Cramer, host of CNBC Mad Money, believes that it could soon happen, powered by the company’s strong loyalty programs and e-commerce initiatives.
Is WMT Stock a Buy, Hold, or Sell on Wall Street?
Overall, on Wall Street, Walmart stock is a “strong buy.” Out of the 36 analysts covering WMT stock, 29 have a “strong buy” recommendation, four rate it a “moderate buy,” and three suggest it’s a “hold.”
Its average price target of $95.49 suggests an upside potential of 4.5% from current levels. However, its Street-high estimate of $105 implies a potential upside of about 15% in the next 12 months.
The Case For Target Stock
Target’s (TGT) seamless integration of brick-and-mortar stores with digital platforms has been a critical driver of success. Services like drive-up and order pickup have enabled customers to shop online and retrieve items quickly, driving convenience and loyalty. However, Target’s recent quarterly results haven’t been up to the mark. The company fell short of consensus revenue and earnings estimates in Q3.
TGT stock is down 11.1% in 2024, compared to the broader market's gain.
Comparable sales increased by 0.3% in the third quarter, driven by a 2.4% increase in guest traffic and a 10.8% increase in digital sales. However, adjusted earnings per share fell 11.9% to $1.85 from the previous year's quarter. Management stated that "unique challenges and cost pressures" had an impact on the company's bottom line.
Despite the earnings decline, the company paid $516 million in dividends during the quarter, representing a 1.8% increase per share. It also repurchased $354 million of its stock.
Target has a higher dividend yield than Walmart, currently at 3.4%. It has a forward payout ratio of 48%, which is also sustainable. Furthermore, Target, like Walmart, has a history of consistent dividend growth, having paid and increased dividends for 54 years. Target has also earned the title of Dividend King.
Analysts expect Target’s revenue and earnings to fall by 1.4% and 3% in 2025, before increasing by 2.8% and 7.1% in 2026. Target stock is valued at 14 times forward 2026 earnings, lower than its historical average of 18x.
Is TGT Stock a Buy, Hold, or Sell on Wall Street?
Overall, on Wall Street, Target stock is a “moderate buy.” Out of the 33 analysts covering TGT stock, 15 have a “strong buy” recommendation, three rate it a “moderate buy,” 14 rate it a “hold,” and one says it’s a “strong sell.”
Its average price target of $156.90 suggests an upside potential of 24% from current levels. However, its Street-high estimate of $210, implies a potential upside of about 65.9% in the next 12 months.
Which Stock is the Better Buy?
Walmart has an advantage over Target, because it offers a wider range of products at lower prices, which is likely why analysts expect higher earnings from Walmart in fiscal 2025 and beyond.
Though Walmart stock is expensive, all in all, Walmart is the better option for those looking for growth in the retail space through innovation and global expansion. The company's ability to adapt to changing consumer behaviors, innovate in e-commerce, and maintain operational efficiency distinguishes it as an industry leader. The company is most likely to maintain its position.
While WMT is not a high-growth stock, its stability and consistent returns, combined with regular dividend payments, make it an excellent choice for risk-averse income investors.
