Walmart stock has jumped 22% in 2020, and Jefferies argues there’s more than one way for the retail giant to keep notching gains.
Analyst Stephanie Wissink reiterated a Buy rating and $165 price target on Walmart (ticker: WMT) on Wednesday as she looks at the company’s ever-expanding ecosystem and how it might propel growth.
She notes that Walmart, like other retailers, responded to this year’s delayed Prime Day event from Amazon.com (AMZN) with its own discounts of about 30% to 50%, focused on electronics and toys, along with kitchen and home goods. The discounts appeared to be roughly consistent with 2019 level, she adds.
Wissink writes that Walmart’s warehouse Sam’s Club division extended its credit-card program with Synchrony Financial (SYF), which should add “benefits to create incremental value for Sam's Club members.” The discount model has been especially successful in 2020, with Costco Wholesale (COST) rising nearly 30% year to date, and BJ’s Wholesale Club Holdings (BJ) soaring more than 80%.
Elsewhere, she notes, recent consumer surveys show that Walmart has earned goodwill for its handling of the Covid-19 crisis, as it was “cited as a top 3 retailer for how well it has responded to the pandemic.” It could also benefit from how the virus has changed shopping habits, as consumers are still prioritizing essentials, using omnichannel options, and plan to continue shopping online. Walmart’s huge store base and its subscription service Walmart+, which includes grocery delivery, fit squarely with these trends.
It’s also worth noting that the company is investing in Ninjacart, an India-based business-to-business fresh produce supply chain that connects merchants, farmers, and producers to retailers, with Flipkart. That fits with Walmart’s renewed focus on higher-growth segments of its business.
Walmart stock was up 0.7%, at $144.95, in recent trading. The S&P 500 was up 0.5%.