Contrarian Opinion: Tariffs, Inflation, and Recession Fears Could Be a Tailwind for This Retail Stock and Propel It to a $1 Trillion Valuation

Right now, there are only seven public companies that are trading at a market capitalization north of $1 trillion. The exclusive list of trillion-dollar stocks includes Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Berkshire Hathaway.

Beyond trillion-dollar stocks, the next three largest companies in the world as measured by market cap are Broadcom, Tesla, and Taiwan Semiconductor Manufacturing. Do you see any themes here?

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With the exception of Berkshire, each trillion-dollar or near-trillion-dollar business dominates the technology sector. The next largest company after those referenced above is retail specialist Walmart (NYSE: WMT). With a market value of approximately $760 billion, Walmart is the most valuable non-pure-play technology business on the planet besides Berkshire.

Image source: Getty Images.

What's interesting is that each company valued higher than Walmart could be facing some unwelcome deceleration across their various businesses thanks in large part to new tariff policies. A common fear in the stock market right now is that tariffs could lead to higher prices (inflation) for consumer goods and raw materials, thereby sparking an economic slowdown (recession).

As a contrarian, I think a tariff-induced slowdown could actually benefit Walmart. Let's explore why Walmart's business is ideally positioned to maneuver around any crises caused by tariffs. From there, I'll make the case for why Walmart could soon earn its entry into the trillion-dollar club.

Walmart's business is built for a tough economy

Walmart is primarily known as a brick-and-mortar powerhouse -- offering consumers a variety of goods across apparel, consumer electronics, produce, home remedies, and much more. While that might not sound too different from stores like Target or CVS, Walmart's main value proposition is its attractive prices. Cost-conscious shoppers tend to gravitate toward stores such as Walmart during periods underscored by rising prices or economic uncertainty.

To back this idea up, let's take a look at some key performance indicators for the retail juggernaut over the last few years.

US Inflation Rate data by YCharts

The chart above illustrates trends seen in Walmart's revenue and gross profit, indexed against inflation rates over the last five years. In addition, I've included the brief (but important) COVID-19 recession -- as illustrated by the grey column on the left. Let's unpack what's happening here.

Following the COVID-19 recession in early 2020, inflation levels started accelerating -- peaking at around 9% in mid-2022. During this period, Walmart's revenue and gross profit started to steadily climb. This is an impressive feat, considering many retailers were plagued by lower foot traffic during the pandemic.

Not only are Walmart's prices one way to attract to consumers, but the company has also done a stellar job complementing its physical retail storefronts with an e-commerce marketplace of its own -- providing it with multiple avenues to monetize shoppers.

Taking this a step further, let's analyze some important metrics retailers use to gauge the health of their business. During the fourth quarter of Walmart's fiscal 2025 (ended Jan. 31), the company recognized same-store sales growth of 4.6%, while transactions rose by 2.8% and average ticket size grew by 1.8%. This means that Walmart is seeing more people come to its stores and spending more money while they are there.

Although same-store sales, transaction volumes, and average order size can be variable in the retail space, I think any concerns related to this are mitigated by Walmart's ability to hold onto its shoppers. The big takeaway I gather from the chart above is that Walmart's revenue and gross profit continue to steadily rise, even as inflation levels have cooled over the last two years.

I think ongoing economic uncertainty from tariffs could wind up being a tailwind for Walmart and its ability to lure consumers in and keep them part of its ecosystem in the long run.

What would it take for Walmart to reach a $1 trillion valuation?

For the fiscal year ended Jan. 31, Walmart's earnings per share (EPS) totaled $2.42. Given the company's current share price of $95, Walmart stock trades for a price-to-earnings (P/E) ratio of approximately 39.

A $1 trillion market capitalization implies roughly a 32% increase Walmart's current valuation of $760 billion. This means in order to reach the trillion-dollar club, Walmart stock would need to be trading around $125 per share.

If I assume that the company expands both its EPS and P/E ratio by 15%, that would imply future earnings of $2.81 and a P/E ratio of 45 for Walmart. In turn, this results in a future share price of about $126, which would put Walmart just above a trillion-dollar market capitalization.

I think this level of EPS growth is attainable for Walmart, especially against the backdrop of a cloudy economic picture. The bigger question mark is whether investors will start applying a premium multiple to Walmart -- viewing it as a more essential player in the retail arena, all while giving the company credit for some of its higher-margin pursuits beyond brick-and-mortar sales.

While the exercise above is rooted in simple math, I am cautiously optimistic that Walmart could emerge as a member of the trillion-dollar club sooner rather than later. Investors looking for opportunities that may be slightly more insulated from tariffs or economic slowdowns may want to consider a position in Walmart right now.

Should you invest $1,000 in Walmart right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Target, Tesla, and Walmart. The Motley Fool recommends Broadcom and CVS Health and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.