Low-price retailer Walmart’s (NYSE: WMT) solid quarterly results from earlier this week proved its resilience and operational excellence in the face of severely uncertain market conditions. Robert W. Baird analyst Peter Benedict deliberated over the company’s quarterly performance and its current progress and emerged bullish on Walmart’s prospects.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Walmart Has Too Many Upsides to Ignore
Walmart’s affordable products, especially in the grocery segment, helped pull more middle-to-high income customers to its stores as inflation rose to a 40-year high during Q2. Mentioning research firm Nielsen’s findings, Benedict noted that the company continues to gain market share in the grocery domain.
Right-sizing its inventory is another step taken by Walmart, which Benedict believes will help the company operate better. Walmart has been focusing on reducing excess inventory, particularly in hardlines, since the first quarter of this year. Moreover, more pricing actions planned for Q3 place the company on a smoother road to optimized inventory in 2H.
“Looking ahead, additional pricing actions planned for 3Q plus a reduction in forward buys (focused on reducing exposure to electronics/home/sporting goods) should help WMT enter the holiday season in cleaner shape both from an absolute level and mix of inventory,” Benedict observed.
The analyst also highlighted Walmart’s constant efforts to update itself to suit the latest consumer behavior. He believes that the strategy to redirect the company toward a fully-integrated omnichannel retail service has helped keep the chain ahead in competition “at a time when many traditional retailers are losing relevancy with consumers.”
Additionally, the company is rapidly scaling its various other early-stage, higher-margin income streams, such as advertising, marketplace, fulfillment services, financial and healthcare services, and data monetization, which have led to a more diversified profit model and a hedge against the impact of market changes.
Benedict noted, “These diversified profit pools represent valuable levers management can pull to fund reinvestment back into the customer value proposition (initiatives like Walmart+) while simultaneously driving sustained EBIT dollar growth.”
Is WMT Stock a Good Buy Now?
After carefully considering all the points, Benedict believes that Walmart can be a compelling stock to buy for the longer term. Needless to say, he reiterated a Buy rating on WMT stock and raised his price target to $155 from $140.
Wall Street, in general, is also bullish on the stock. The sentiment is supported by 21 Buys and seven Holds. WMT’s average stock forecast reflects an average price target of $151.61, indicating 9% upside to current price levels.
Closing Remarks
All in all, Walmart’s smart pricing, income diversification strategy, inventory right-sizing efforts, and operational excellence are the pillars that are holding the company strong against headwinds. Moreover, these are the factors that are expected to continue to drive the company toward further growth.
Read full Disclosure
