Walmart: 3 Reasons Why Argus Is Turning Bullish

Shares of Walmart Inc WMT are now attractive after falling 20 percent from their 2018 highs, according to Wall Street's newest bull analyst.

The Analyst

Argus analyst Chris Graja upgraded Walmart's stock rating from Hold to Buy with a new $100 price target.

The Thesis

The bullish case for Walmart's stock is threefold, Graja said:

Walmart's stock is now trading at a P/E multiple that sits at a 10-percent discount to the overall market multiple.
An improving macro environment for Walmart's core low-and-middle-income shoppers.
The flattening of the yield curve bodes well for high quality stocks like Walmart, which boasts excellent operating efficiency, an AA credit rating and a history of yearly dividend increases dating to 1974.

These three factors should give investors sufficient confidence that Walmart will not only continue to be a "survivor in the very tumultuous retail sector," but will outperform the S&P 500 index, Graja said. This view is backed by the company's "top tier" finances and management's commitment to improve the store environment, he said.

While Walmart's margins are lower than what is typical for a company with such high financial strength, its debt is not exceptionally low and it continues to face intense competition from Amazon.com, Inc. AMZN, the analyst said.

"It will take time — and money — for WMT to earn (or acquire) the confidence that AMZN has deservedly won as an online seller, but there is a convenience to being able to place an online order and pick it it up in a local store, and there is certainly a benefit to being able to do an in-store return," Graja said.