Walmart Just Posted Its Biggest One-Day Drop Since 2022. History Says What Its Big Drops Have Been Worth.

Walmart's stock fell 9.2% after the company reported a deceleration in comparable sales growth. The drop was the fourth-largest in the past 15 years, but history suggests that the stock may recover modestly. In the past, Walmart's stock has fallen by 10% or more on several occasions, only to recover within a year. However, the company's sales growth has been decelerating, and the stock is now trading at a premium price. The company's guidance for the third quarter suggests that sales growth will continue to slow, which may be a concern for investors. Nevertheless, the stock's price still assumes a lot, and the company's business continues to compound underneath. Therefore, the record mostly cautions against panic and says little about bargains.

Walmart's Worst Days Aren't Disasters Walmart's worst days haven't been disasters. Buyers of each drop were ahead within a year, and the business kept compounding underneath. But the gains that followed were ordinary, and this year's smaller May drop still hasn't been recovered.

The Pattern of Modest Recoveries The pattern is consistent, and consistently modest. Buyers of each drop were up 6% to 14% a year later. But measured from the day before each drop, the stock had only just clawed back to even in 2015 and 2022, and it was still lower a year after 2018.

What's Different This Time There's another difference between Thursday and the three earlier drops, and it may matter more than the pattern. The three big drops of 2015, 2018, and 2022 all arrived with bad profit news attached -- a warning in 2015, a margin squeeze in 2018, a cost surge in 2022. Thursday's arrived with a raised full-year outlook but also third-quarter guidance that calls for slower growth still, with sales up 3% to 3.75%. Investors weren't reacting to a profit shock -- they were marking down expected revenue growth.