4 Walmart Analysts On Q2 Report, What's Next For Retail Giant

Retail behemoth Walmart Inc WMT reported second-quarter results Tuesday that came in much better than expected across multiple metrics. Here's how the Street reacted. 

The Walmart Analysts

Raymond James analyst Bobby Griffin maintains an Outperform rating on Walmart's stock with a price target lifted from $140 to $145.

BofA Securities analyst Robert Ohmes maintains a Buy on Walmart with an unchanged $150 price target.

MKM Partners Bill Kirk maintains a Neutral on Walmart's stock with an unchanged $147 price target.

KeyBanc Capital Markets analyst Edward Yruma maintains an Overweight rating on Walmart with a price target lifted from $138 to $150.

RayJay Says Walmart Deserves Premium Valuation

Walmart's "excellent" second quarter makes the case for being more bullish on the stock, as it is in a position to win in today's retail landscape, Griffin said in a note.

The business is also considered defensible and has the growth characteristics to gain market share in "any retail environment," the analyst said. The stock's premium valuation versus its historical average is justified, he said.

Even in a "more normal environment," Walmart's competitors don't have the capability of being less promotional, especially when competing against Walmart's pickup and delivery options, Griffin said. 

Related Link: Walmart's Q2 'Phenomenal,' Says Former US CEO

BofA Sees Omni-Channel Strength In Walmart 

Walmart's strong 9.3% comp performance in the second quarter should decelerate to a more normalized 4%-plus range, Ohmes said in a note.

This will be driven by a reduction in stimulus benefits, a slow or choppy start to back-to-school and COVID-19-related uncertainties, he said. 

The case for owning Walmart's stock is based on management's omni-channel strategy, according to BofA. Ohmes named the following as the key components of the vision include:

• Merging grocery and general merchandise apps.
• Integrating in-store and online merchandising.
• Discontinuing Jet.com to support the core Walmart.com brand.
• Increasing the availability of general merchandise items for pickup.

MKM Says Walmart Ready For Battle

Walmart reported a beat across nearly every metric in its second-quarter report with one notable exception, Kirk said in a note: Walmart's grocery sales were up by a high single-digit in the quarter, short of the total industry growth of 12%.

Walmart "does not take kindly" to market share losses and is "ready for a market share battle" with its $17 billion in cash on hand, $6 billion of which is excess cash ready to be deployed, the analyst said.

A major strategic investment or announcement could be forthcoming to win foot traffic moving forward, he said. 

This will merely intensify competition in the near-term as Walmart flexes its financial muscles, Kirk said. 

"While the industry has been rational through the COVID-19 disruption, we expect competition to intensify and Walmart to apply pressure on the group as comp sales wane." 

KeyBanc Highlights Walmart's E-Commerce Growth

Walmart's U.S. e-commerce sales were up 97% and accounted for two-thirds of all U.S. comps, Yruma said in a note.

The momentum is likely to continue, as management is expanding the product assortment and investing in fulfillment solutions, the analyst said. 

Walmart is making similar e-commerce investments across the world, including a same-day delivery option at most Sam's Clubs in Mexico, he said.

In India, Walmart's Flipkart is trending above pre-COVID-19 levels after a temporary shutdown in the first quarter, according to KeyBanc. 

Looking forward, a membership program should prove successful given the value Walmart offers in terms of delivery services, Yruma said. 

WMT Price Action: Shares of Walmart were trading lower by 1.8% at $132.28 at the time of publication Wednesday. 

Related Link: Study: Walmart Outsells Amazon In Online Groceries

Photo courtesy of Walmart.