Walmart Inc (NYSE:WMT) has impressed analysts with its strong second quarter financial results that outperformed Street expectations.
UBS analysts wrote in a note to clients that the retailer’s 2Q outperformance showed that its offering of convenience and value is resonating with cost-conscious customers and its productivity initiatives and success in its alternative businesses offer more room to run.
“We believe the pieces have long been in place for WMT to exert its scale and resources in a way that would translate to a model that would be rewarding for all of its stakeholders,” they wrote.
“While the shares trade at a premium to historical levels, we think they can hold their multiple and continue to appreciate as earnings grow.”
The UBS analysts added that they believe Walmart’s shares are undervalued at current levels, with the stock trading at about US$157 late morning on Friday.
They raised their price target on the stock from $US173 to US$190 and awarded it a ‘Buy’ rating.
Jefferies analysts also have a US$190 price target on Walmart and a ‘Buy’ rating, as they too are bullish on the stock given Walmart’s “better-than-expected” results.
“Given the momentum in the business, we believe WMT is well-positioned to continue to gain share, due to its competitive pricing, convenient shopping options, and dedication to the customer experience,” they wrote.
“We expect this trend to continue, as the consumer wallet is tightened, student loan payments resume, trade-down continues, private brand penetration grows, and consumer spending habits shift from wants to needs.”
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