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- Keybanc analyst Bradley Thomas maintains Walmart Inc (NYSE: WMT) with an Overweight rating, raising the price target from $170 to $175. The re-rating reflects multiple long-term drivers ahead.
- Keybanc hosted investor meetings with senior management from WMT.
- Thomas believes WMT has the most compelling growth outlook of the past 20 years, supported by share gains in key categories (grocery and digital), accelerating growth from margin accretive businesses (international, advertising, and fulfillment), and cost and efficiency benefits from automation.
- The analyst reiterates that WMT’s financial algorithm is improving as growth initiatives begin to scale and contribute to enterprise results.
- High-growth and high-margin initiatives include the advertising business, Walmart International (Flipkart and PhonePe), Marketplace, Walmart fulfillment services, and memberships.
- He estimates U.S. advertising revenues of $2.25 billion, with the business likely to break the list of top 10 advertising businesses in 2023 or 2024.
- Within International, PhonePe continues to grow, with total payment volume (TPV) in 2022 increasing 46% y/y to $0.95 trillion.
- As a comparison, PayPal Holdings, Inc (NASDAQ: PYPL) grew TPV by 13% in 2022 to $1.35 trillion.
- Within Marketplace, the company grew the number of sellers on the site by 50% y/y in 2022, with a 175% growth in the number of sellers utilizing Walmart’s fulfillment services and over 100% growth in the number of sellers using Walmart Connect (advertising).
- Lastly, he sees the continued strong comps at Sam’s Club as encouraging as the banner begins a multi-year unit expansion.
- Margins should benefit from supply chain improvements and increased automation, improving operating efficiency and lowering fulfillment costs.
- WMT continues to focus on its supply chain and plans to deploy automation to serve the omnichannel strategy better and drive increased efficiency.
- In the Tampa market, the analyst saw firsthand the automation the company is leveraging at distribution and market fulfillment centers.
- Given the automation, these fulfillment centers can double the number of fillable orders compared to legacy centers.
- Price Action: WMT shares traded lower by 0.47% at $152.05 on the last check Tuesday.
| Feb 2022 | Morgan Stanley | Maintains | Overweight | |
| Feb 2022 | Raymond James | Maintains | Outperform | |
| Feb 2022 | Deutsche Bank | Maintains | Buy |
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