Piper Sandler has begun research coverage on Walmart (NYSE:WMT) with an Overweight rating and a price target of $81, the investment bank said in a Wednesday note.
Despite a strong year-to-date performance with shares up 32%, analysts believe Walmart is at the beginning of an unprecedented profit growth phase for a large, mature retailer.
“By leveraging its massive omni-channel model, WMT is driving significant valuation creation in the form of new and high-margin revenue streams that should not only accelerate EBIT growth in the years to come, but will also create a steadier and more sustainable growth model, in our view,” analysts at Piper Sandler said.
Walmart currently targets an annual EBIT growth rate of 4%-8% in the medium term, however, analysts believe that these high-margin revenue streams will drive EBIT growth at or above the upper end of this range over the next five years.
In a separate note, Piper Sandler said it is also initiating coverage of Target (NYSE:TGT), assigning the retailer a Neutral rating and a price target of $156.
While they appreciate Target's robust omni-channel model and strong merchandising capabilities, analysts find the company's 2024 earnings per share (EPS) guidance and medium-term EBIT margin target of 6% to be reasonable.
“That said, we don't see a discernable catalyst to push sales/margin above estimates near-term,” they noted.
Moreover, Piper Sandler pointed out potential risks for 2025, including tariff concerns and management transition issues, as CEO Brian Cornell agreed in 2022 to remain with the company for only three more years.
WMT shares rose 0.2% while TGT fell 0.8% in premarket trading Wednesday.
WMT currently has a Buy rating from 39 analysts, while 11 rate it as Neutral and 3 as Sell. In comparison, TGT is rated as Buy by 25 analysts, Neutral by 19, and Sell by 2.