Walmart (WMT) is seen as less likely to outperform in the short term, but its long-term prospects remain positive, Oppenheimer said in a Tuesday note ahead of its Q2 results on Aug. 20.

"We now see a less compelling outperformance case shorter term driven by three primary factors," the report said.

In Walmart's US pharmacy segment, revenue pressure, mainly from the Inflation Reduction Act, could drive down comparable sales to below consensus estimates in Q2 and later in the year, the report said.

The stock's current high valuation could be subject to a lower re-rating if the Walmart US comparable sales growth decelerates to 2.5% to 3.5% range from the 4% pace, the note said.

Further, consensus estimates are already higher than the firm's longer-term guidance, leaving little room for upside, it added.

However, the report said Walmart's long-term outlook remains positive and realistic.

Oppenheimer downgraded the stock to perform from outperform and removed its $140 price target.

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