5 Walmart Stock Catalysts Coming Before The End Of 2021

Walmart Inc WMT has significantly lagged the overall S&P 500 over the last six months, but BofA Securities analyst Robert Ohmes said Tuesday the discount retailer has plenty of potential bullish catalysts ahead between now and the end of the year.

5 Walmart Catalysts Ahead: Shares of competitor Target TGT are up 48.6% year-to-date, while Walmart shares are up just 1.5%.

Ohmes said there are at least five things that could jumpstart Walmart shares in coming months:

Better-than-expected second-quarter earnings. Walmart reports second-quarter earnings Aug. 17, ad Ohmes is calling for a modest earnings beat and between 5% and 6% U.S. same-store sales growth.

Back to school upside and general merchandise strength in the third quarter. Ohmes said general merchandise spend has been growing roughly 20% from 2019 levels even after the stimulus payment benefits subsided, and categories like Home have been particularly strong.

Market share gains in grocery. Nielsen data since March suggests Walmart has been gaining grocery market share from competitors as higher-margin, in-store Deli/Bakery sales have rebounded significantly from 2020 pandemic levels, Ohmes said. 

Walmart's e-commerce growth could exceed that of Amazon.com, Inc. AMZN. Ohmes is projecting 25% growth in Walmart owned e-commerce sales in the second quarter. While that would be a sharp decline from its 37% growth in the first quarter, it would outpace Amazon’s second-quarter growth numbers.

Walmart investors are getting increased visibility on alternative profit streams. Ohmes specifically mentioned initiatives like advertising, third-party fees and services and health care as three nascent revenue streams for Walmart.

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How To Play It: Given all of Walmart’s momentum heading into the second half of the year, Ohmes said he is bullish on the stock.

“We believe WMT's omni-channel transformation in the US will continue to gain momentum and support more sustainable and predictable positive same-store sales and traffic at US Supercenters and US e-commerce and GMV growth that should support P/E multiple expansion,” the analyst said. 

Bank of America has a Buy rating and $185 price target for WMT stock.

Benzinga’s Take: Walmart’s earnings multiple of around 34.1 don’t make the stock appear particularly cheap.

Even after its big 2021 run, Target’s earnings multiple of 21.4 makes the stock look relatively attractive from a pure valuation standpoint.

Photo: courtesy of Walmart.