Walmart's stock rises into record territory after another analyst turns bullish

By Tomi Kilgore

Truist raises rating on the stock to buy, as Walmart is taking market share from 'almost everyone'

Shares of Walmart Inc. were headed back into record territory on Tuesday, as Truist turned bullish on the discount retailer amid accelerating market-share gains.

Analyst Scot Ciccarelli raised his rating on the stock to buy, after being at hold since at least January 2022. He raised his stock price target to $89 from $76.

The stock (WMT) climbed 0.4% soon after the opening bell, to trade above the Sept. 13 record closing price of $80.60.

"Walmart continues to gain share across income levels, due to its focus on price, convenience and assortment," Ciccarelli wrote in a note to clients. "Our work suggests that the company is increasingly using its rapidly growing, higher-margin revenue streams like advertising, membership and marketplace to both expand price gaps/gain share and structurally push margins higher."

He believes the combination of accelerating market share gains, the scarcity of mega-capitalization stocks that act as both offensive and defensive investments in the current environment and a structurally more profitable company should lead to a "far higher-than-historical" valuation.

Even at Walmart's "immense" size, the company is projected to grow same-store sales at around 4% in the current fiscal year, after growing 5.6% last year, and with total revenue seen rising 4.7% to $678.3 billion after rising 6% last year.

Read: Walmart earnings: Stock rises to a record as earnings show consumer resilience.

"When you are that big and still growing at that rate, who are you taking share from?" Ciccarelli wrote. "Almost everyone."

He also noted that over the past eight years or so, Walmart has undergone two major transformations.

First, the company "completely overhauled" the core retail business, including re-implementing its low-price focus while improving the shopping experience, including making the in-store experience better and showing marked improvements in convenience through home delivery, buy-online-pick up-in store services and subscription services.

Second, which Walmart is still in the early stages of, the company is changing its business model to use high-margin revenue streams like advertising and Walmart Marketplace for third-party sellers to help subsidize retail operations.

"We believe that both of these factors should lead to a new, higher valuation paradigm for [Walmart] shares," Ciccarelli wrote.

With his upgrade, 35 of the 39 analysts surveyed by FactSet who cover Walmart's stock - 90% - are bullish, while three are neutral and one is bearish. At the end of August, 32 analysts were bullish.

Walmart's stock has soared 53.4% year to date. In comparison, the Consumer Staples Select Sector SPDR ETF XLP has rallied 15.3%, the Consumer Discretionary Select Sector SPDR ETF XLY has gained 11.7% and the S&P 500 index SPX has advanced 20%.

-Tomi Kilgore

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09-24-24 0948ET

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