Goldman Sachs Upgrades Walmart To Buy, Credits Tax Reform

Shares of Wal-Mart Stores Inc WMT have gained more than 50 percent over the past year as the company's various initiatives gained momentum. But one notable firm kept a neutral stance on the stock until now.

The Analyst

Goldman Sachs' Matthew Fassler upgraded Walmart's stock from Neutral to Buy with a price target boosted from $115 to $117. He also added the stock to the firm's "Americas Conviction List."

The Thesis

Walmart's core business of selling consumables to middle-income consumers in small markets "remains compelling" and the company is very much "in control of its own destiny," Fassler said in a note. But now the stock can be declared a "Buy" due to President Donald Trump's tax reform, which will result in stronger income growth for its core customer.

The tax reform will result in "significant" corporate tax savings, which can be reinvested in the business and generate above consensus EBIT gains, Fassler said. Investors can also expect to see a "meaningful" boost to the stock's dividend from its tax savings and repatriation of overseas cash, the analyst said.

Price Action

Shares of Walmart gained more than 2 percent Thursday and was trading at $104.84, which is above the stock's all-time high of $102.94.

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