Research coverage on Walmart (NYSE:) has been initiated by Piper Sandler, who has assigned an Overweight rating and a price target of $81 in a note released on Wednesday. Despite a strong year-to-date performance with shares up 32%, analysts believe Walmart is poised to enter a phase of unprecedented profit growth for a large, mature retailer.
Utilizing its massive omni-channel model, Walmart is driving significant valuation creation through new and high-margin revenue streams. This is expected to not only accelerate EBIT growth in the coming years but also establish a more stable and sustainable growth model, according to analysts at Piper Sandler.
While Walmart currently targets an annual EBIT growth rate of 4%-8% in the medium term, analysts predict that these high-margin revenue streams will drive EBIT growth to meet or exceed the upper end of this range over the next five years.
In a separate report, Piper Sandler also announced coverage initiation of Target (TGT) with a Neutral rating and a price target of $156. Despite acknowledging Target’s strong omni-channel model and merchandising capabilities, analysts find the company’s 2024 earnings per share (EPS) guidance and medium-term EBIT margin target of 6% to be reasonable.
However, the analysts do not foresee any immediate catalyst to surpass sales/margin estimates in the near future. Additionally, Piper Sandler highlighted potential risks for 2025, including tariff concerns and management transition issues as CEO Brian Cornell has agreed to stay with the company for only three more years.
In premarket trading on Wednesday, Walmart’s shares rose by 0.2% while Target’s fell by 0.8%. Currently, Walmart has a Buy rating from 39 analysts, with 11 rating it as Neutral and 3 as Sell. On the other hand, Target is rated as Buy by 25 analysts, Neutral by 19, and Sell by 2.