The Bank raised its rating to “buy” from “hold” for Walmart shares, predicting that the retailer will report sales above expectations in the third quarter.
Paul Trussell stated this week in a research note titles Flexing Its Muscles: “We believe the company is now in position to accelerate market share gains in grocery while also growing EBIT [earnings before interest and taxes] dollars (ex. Flipkart).”
“Given the pace of disruption in the food retail landscape and our framework that the top players will reap the benefits of industry consolidation and increasing adoption of online grocery, we believe WMT is best positioned to continue to take both mind and market share going forward.” It was further stated.
Walmart shares closed up 2.5% on Tuesday. Trussell raised his price target to $113 from $89 for Walmart shares—representing 19% upside to Monday’s close. The analyst noted that Walmart had 11% of the US online grocery market last year. He predicts that the share will rise to 17% versus Amazon’s 19% in 2025.
“We believe Walmart has positive momentum with robust underlying trends in the core business, and an expanding online platform (including both walmart.com and jet.com) that positions the company as a legitimate contender against Amazon in the long-term,” he stated.
Trussell also increased his Walmart US third-quarter same store sales growth estimate to 3.5% from 2.9% versus the 2.8% Wall Street consensus.
The company’s stock is down 4% this year through Monday versus the S&P 500’s 8% gain.
In 2017, Walmart had come in second place to rival Amazon in the grocery wars, accounting for about 11% of the market.
Trussell had stated back then that: “we believe the retailer could surpass Amazon by end of 2018… Walmart has positive momentum with robust underlying trends in the core business, and an expanding online platform that positions the company as a legitimate contender against Amazon in the long-term.”
In an attempt to increase its online grocery delivery presence, Walmart started free two-day shipping in January of 2017, and partnered with various delivery services like Uber, Lyft, DoorDash and Postmates.
According to Deutsche Bank, these initiatives are set to eventually help “Walmart reach 17% online grocery market share by 2025.”