The recent significant sell-off in the stock market is challenging investors’ patience, particularly due to the effects of new tariffs and subsequent pauses, which have introduced a great deal of short-term uncertainty. This situation is especially pertinent to global retailers such as Walmart and Target, which sell products and source materials from various countries. Despite the overall decline in stocks, investors may view this moment as a buying opportunity, assuming the long-term fundamentals remain robust.
With the current situation, the question arises: which of these two retail giants offers superior investment potential for those intending to buy and hold for an extended period?
Walmart operates its namesake stores both in the U.S. and internationally, as well as the Sam’s Club warehouse membership clubs in the U.S. and Puerto Rico. In the last fiscal year, Walmart U.S. contributed 69% of the company’s $676.3 billion in sales. Walmart’s business model emphasizes maintaining low costs and prices, a strategy sustained by extensive investment in technology to seamlessly integrate physical stores with e-commerce, enhancing convenience and delivery speed.
Almost all U.S. Walmart stores offer same-day pickup and delivery services. Additionally, the company launched Walmart+, a subscription service providing benefits like free shipping, discounts on gas, and a faster checkout process. These attributes, combined with competitive pricing, continue to attract customers, with Walmart U.S. reporting a 4.6% increase in same-store sales during the fiscal 2025 fourth quarter, up to January 31. This growth was largely driven by increased traffic and spending.
Walmart remains highly profitable, which enables continued investment to outpace competitors. In the fourth quarter, the company’s operating income, adjusted to exclude foreign currency impacts and certain non-operating expenses, rose by 9.4% to $7.9 billion. Despite the recent market sell-off, Walmart’s share price has only declined by 0.8% in 2025 through April 9, compared to a 7.2% drop in the S&P 500 index.
Walmart’s valuation has been stable since the start of the year, with its stock trading at a price-to-earnings (P/E) ratio of 37.
Target, on the other hand, offers a wide range of products including apparel, beauty, home furnishings, food and beverages, and household essentials. The company strives to distinguish itself with its private-label brands and products available exclusively through its stores and website.
Recently, Target has experienced decreased sales as consumers concentrated on essential items due to rising costs. Nonetheless, Target’s fiscal fourth-quarter same-store sales saw a 1.5% improvement, driven by higher traffic, although customer spending declined slightly. As of February 1, Target’s gross margin decreased by 0.4 percentage points to 26.2%, attributed to increased promotional activities and markdowns.
Although management has projected a cautious outlook for the year with flat comps, Target continues to attract shoppers, even as spending dips and discounts become more appealing due to broader economic factors expected to diminish over time.
Target’s stock price has significantly fallen, nearly 28% this year, influenced partly by tariff implementations and their anticipated economic impact on the company’s costs and pricing, which are expected to affect short-term profitability. Nevertheless, this has made the shares more affordable, with the stock’s P/E ratio decreasing from 14 to 11 at the start of 2025.
When deciding between the two retailers, Walmart’s consistently low prices are likely to continue drawing customers, particularly during tough economic times, as evidenced by its relatively stable share price. Conversely, Target’s strategy relies on differentiated merchandise, and it is expected that customers will opt for more affordable options during challenging periods. However, in the long term, consumers are likely to return to Target.
Considering Target’s more attractive valuation and favorable long-term prospects, it currently presents a better investment opportunity compared to Walmart.
