While it may not be a trendy tech stock, one name has been quietly outperforming most of the Magnificent 7 stocks this year. We’re talking of retail giant Walmart (NYSE:WMT), whose stock is up 31% year-to-date. With its Q2 results set to be released Thursday, investors could be in for even more good news.
That, at least, is the opinion of Deutsche Bank analyst Krisztina Katai who, ahead of the print, takes an upbeat view of what’s coming.
“We believe WMT’s 2Q results will showcase that the company is distinguishing itself from the rest of retail with continued momentum – albeit with some moderation – amidst a slowing consumer backdrop,” Katai explained. “Moreover, we think the upcoming print will show the model’s resilience – and the many levers at its disposal to deliver on its targeted algorithm – as opposed to meaningful profitability upside (e.g. 1Q’s strong EBIT$ beat).”
That said, fueled by alternative revenue sources, “lean inventories,” and a stronger contribution from e-commerce, Katai still thinks operating income “grew faster than sales.”
This is down to a combination of factors, including sustained momentum in Walmart+, with a Deutsche Bank survey indicating “record penetration” in Q2, boosted by the increased adoption of Walmart+ Assist. In addition, vendor price investments, the introduction of new private label products such as bettergoods, the relaunch of No Boundaries, and a heightened focus on key holiday periods like Back to School have all contributed to Walmart’s strong performance.
Katai also anticipates management will likely increase the full-year EPS guide to the upper end of the range ($2.23-$2.37) and highlight “stable underlying” same-store sales trends. However, Katai believes the company might also adopt a more cautious outlook for 2H due to potential election-related noise, an unfavorable calendar, and “continued general merchandise softness.”
“Bottom line,” the analyst summed up, “we continue to have conviction in both the near- and long-term outlook and see a path for EPS upside as WMT is still in relatively early innings of its retail transformation.”
Given that assessment, it’s no surprise to see Katai rates WMT shares a Buy, while her $77 price target makes room for further gains of 13% in the months ahead. (To watch Katai’s track record, click here)
Most analysts on Wall Street share this positive view. With 27 Buy recommendations and 3 Holds, the consensus rating for Walmart is a Strong Buy. The average price target of $74.11 implies a ~9% upside from current levels. (See Walmart stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.