On Monday, Deutsche Bank displayed a positive stance on Walmart Inc. (NYSE:WMT) shares, increasing the retail giant's price target to $77 from $71, while retaining a Buy rating.
The firm's optimism stems from recent investor meetings in Europe with Walmart's top management, including insights from CFO John David Rainey and other senior executives.
The discussions with Walmart's management revealed a strong belief in the company's ability to grow both its top and bottom lines. Key factors contributing to this outlook include anticipated market share gains and the potential for increased profitability through initiatives such as supply chain automation and the development of alternative revenue streams, such as advertising and membership programs.
Walmart's strategy also involves improving e-commerce profitability, with a focus on third-party (3P) profitability and reducing first-party (1P) losses. The company is expected to see a significant increase in operating profit from these high-margin alternative businesses, potentially reaching nearly 30% by 2026, compared to less than 20% in 2023.
The analyst's report suggests that the separation and independent valuation of Walmart's two core business areas could lead to further upside for the company's stock. The enhanced visibility into Walmart's earnings potential from its alternative, high-margin businesses was cited as a compelling reason for the investment case on Walmart shares.
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