Walmart's stock has tripled in three years and now trades at a nosebleed valuation that would make a Silicon Valley startup blush. The problem? It's still growing like a grocery store, not a tech company.

Let's cut through the hype. Walmart is trading at around 45 times earnings despite revenue growth of just 5% annually and slowing EBITDA growth around 3%. The bull case hinges entirely on the idea that Walmart's e-commerce platform will become a high-margin advertising juggernaut like Amazon. But the numbers don't support the story.

Walmart's online business has indeed grown impressively, from around $25 billion in 2019 to $105 billion last year. That's real growth. But here's what Wall Street conveniently ignores: despite all that e-commerce momentum, EBIT margins have stayed stuck around 4% since 2019. The website hasn't moved the profitability needle at all.

An analyst recently ran the numbers on what it would take to justify Walmart's current stock price. Even if you assume Walmart completely kills Amazon and captures the entire e-commerce profit pool, around $50 billion, you'd still be paying 20 times earnings. That's historically expensive for a retailer. Under more realistic assumptions with current trend revenue growth and margins, the stock looks about 68% overvalued.

If you put in rosier assumptions, lower cost of capital, revenue acceleration, margin expansion, you still get a 17% overvaluation. Translation: there was maybe some justification for the valuation late last year, but this year's surge into the $90s is momentum chasing, not fundamentals.

Insiders seem to agree. Selling has picked up notably in recent months, which is usually a yellow flag when a stock is at all-time highs. One analyst downgraded the stock recently, citing valuation concerns, and Walmart has started underperforming other consumer defensive stocks, exactly what you'd expect if the market is starting to question the story.

Here's the thing: Walmart is simultaneously being priced as both a bond-proxy defensive stock and a hyper-growth tech monster. It can't be both. When the market stabilizes and the flight-to-safety trade unwinds, money will rotate out of overvalued defensives. And Walmart, priced like a growth stock with grocery store growth, will be first in line for a rerating.