Walmart (NYSE:WMT) gained over 1% in pre-open trading Tuesday after Piper Sandler upgraded the stock on market share gains.
Analysts upgraded the retailer to Overweight from Neutral while raising their price target to $210 from $145, suggesting a 32% upside from Monday’s closing price.
“We believe as grocery inflation subsides, WMT has an opportunity to further extend market share gains, and we upgrade the stock to Overweight,” the analysts commented. “While we think intuitive logic dictates that WMT is well positioned during an inflationary period (trade down), we believe that a gradual intensification of promos augurs well for WMT given its sharp focus on price, and we raise our estimates accordingly.”
After analyzing approximately 390 rollback items, the firm found that a rollback at WMT results in a significant price gap compared to Kroger (NYSE:KR), a local grocery chain, and Amazon Fresh. Pre-rollback, WMT has a -12% price gap vs Kroger, but post-rollback, the gap increases to -19% compared to Kroger's regular prices, and -19% and -29% compared to the local grocery chain and Amazon Fresh, respectively.
Furthermore, they note improvement in Sam's Club's performance (with seven consecutive quarters of comparable store sales exceeding those of COST) is not fully recognized by investors. When considered independently, with its $84 billion revenue, Sam's would rank as the third-largest retailer within the firm’s coverage. "More importantly, we believe that under Sam's CEO Kath McLay, the business repositioned for growth," the analysts added.