KeyBanc Maintains Overweight Rating on Walmart Amid Strong Performance and PhonePe IPO Filing

Technology Sector Leads Gains After Strong Earnings Reports

U.S. equities closed higher on Tuesday, with the S&P 500 rising 1.2%, as investors reacted to a lower-than-expected inflation report.

Analyst Reaffirms Positive Outlook for Walmart Amidst Strategic Moves

KeyBanc Capital Markets has reiterated its Overweight rating for Walmart Inc. (WMT), maintaining a price target of $110. This affirmation comes as the retail giant demonstrates continued robust financial performance and strategically advances its diversified business portfolio, notably through its Indian fintech subsidiary, PhonePe.

Walmart is currently trading near its 52-week high, with a market capitalization of $819 billion. While InvestingPro's Fair Value analysis suggests the stock may appear overvalued, analyst consensus remains largely positive. Other firms such as Piper Sandler and UBS also hold Overweight/Buy ratings with price targets of $111.00 and $110.00 respectively, while BofA Securities recently increased its price target to $125.00.

Walmart's Financial Resilience and PhonePe's IPO Momentum

Walmart continues to exhibit strong financial health, reporting annual revenue of $693 billion and maintaining a healthy gross profit margin of 24.9%. The company has adeptly managed net price inflation, recording 1.1% in the second quarter, with management anticipating an acceleration in the latter half of the year, contingent on the evolving tariff landscape. This performance underscores Walmart's ability to navigate rising input costs that have challenged many retailers.

A significant development is the confidential IPO filing by Walmart's Indian fintech subsidiary, PhonePe. The IPO is estimated to value PhonePe at approximately 120 billion rupees, or around $1.5 billion, with plans to raise ₹10,000–13,000 crore ($1.2–1.5 billion) by selling shares from existing investors, including Walmart, Tiger Global, and Microsoft. PhonePe has been converting into a public limited entity and preparing for this listing, tapping investment banks like JPMorgan, Kotak Mahindra Capital, Morgan Stanley, and Citigroup.

PhonePe has shown impressive financial growth, with consolidated revenue surging 40% to ₹7,115 crore in the fiscal year ended March 31, 2025 (FY25), up from ₹5,064 crore in FY24. Concurrently, its consolidated net loss narrowed by 13% to ₹1,727 crore from ₹1,996 crore a year ago. The company also achieved free cash flow positivity and saw its adjusted EBITDA (excluding ESOP cost) more than double to ₹1,477 crore.

Strategic Diversification and Market Positioning

Walmart's strategy extends beyond traditional retail, with its alternative businesses—including advertising, fulfillment, membership, and marketplace services—providing crucial flexibility in pricing strategies and contributing significantly to its overall performance. These segments are viewed by KeyBanc as instrumental in Walmart's ability to thrive across diverse operating environments.

PhonePe's strategic importance lies in its dominance within the Indian digital payments sector. As of August 2025, PhonePe held a 46% market share by transaction volume in India's Unified Payments Interface (UPI) market, surpassing competitors like Google Pay. The company has diversified its offerings beyond core payments into insurance broking, lending, wealth management, and technology services, reducing reliance on lower-margin UPI transactions and positioning itself as a broad financial services and consumer tech platform. This diversification has resulted in substantial growth in revenue from insurance and lending distribution services, which rose 208%.

Expert Perspectives

Analysts emphasize Walmart's strategic advantages:

"KeyBanc highlighted that Walmart's alternative businesses—including advertising, fulfillment, membership, and marketplace—provide management flexibility on pricing strategies. The firm considers these segments key to Walmart's ability to navigate various operating environments."

Furthermore, Walmart's pricing leadership and delivery capabilities are frequently cited as drivers for its sustained sales and market share gains.

Outlook: Unlocking Value Through Digital Expansion

The anticipated PhonePe IPO is a pivotal event, expected to unlock significant value for Walmart by showcasing its expanded presence in global digital finance and its diversified growth strategy. While Walmart is expected to retain a majority stake post-IPO, the successful listing and PhonePe's improved financial performance are projected to positively contribute to Walmart's international segment growth projections. This move reinforces Walmart's long-term vision, positioning it not merely as a retail giant but also as a formidable player in the rapidly evolving fintech ecosystem, particularly in high-growth markets like India. Investors will be closely watching the IPO's progression and Walmart's continued integration of its diverse business units to assess future valuation impacts.