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Will Analysts Upgrade Walmart Stock?

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Current rating summary

The majority of analysts covering Walmart (WMT) stock continue to have a neutral stance on the company’s prospects. About 50.0% of them have rated the stock a “hold,” 44.0% have recommended a “buy,” and 6.0% are maintaining a “sell” rating. They’ve given Walmart a consensus score of 2.4 on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”).

Walmart stock closed at $84.13 on October 10, 2017, which is almost at par with analysts’ target price of $84.66. In comparison, analysts have a neutral outlook on Target (TGT) and Kroger (KR) and a positive stance on Costco (COST).

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Could there be an upgrade?

Walmart currently seems to be firing on all cylinders. It’s seeing improved in-store performance reflected through high traffic and a rise in the average transaction size. Its value pricing, focus on merchandising, new offerings, and integration with technology seems to be paying off and driving consumers to its stores.

Walmart’s e-commerce business is also growing in leaps and bounds. Low price offerings and the convenience of shopping with faster delivery mechanisms are helping the company boost its market share. Its e-commerce business is projected to rise at a fast pace, given some of its recent customer-friendly moves that we looked at in the previous part of this series.

Given the company’s increased investments, its margins could be at risk and are expected to remain muted in the near term. Stiff competition from Amazon (AMZN) could restrict its upside potential, which seems to be keeping analysts on the sidelines.

Despite lower margins, Walmart has managed to improve its profitability in the first half of fiscal 2018. The company expects its bottom line to grow 5.0% in fiscal 2019, which could boost investor confidence in the stock and result in target price and rating upgrades.

After the company’s upbeat announcement on Tuesday, October 10, 2017, ‎KeyBanc Capital Markets raised its target price for Walmart stock to $100 from $90 and maintained its “overweight” recommendation. Deutsche Bank increased its target price to $84 from $81 with a “hold” rating.

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