KeyBanc Capital Markets analysts told investors in a note Tuesday that Walmart (NYSE:WMT) has the "most compelling growth outlook of the past 20 years." The analysts raised the firm's price target on the stock to $175 from $170, maintaining an Overweight rating.
They explained that KeyBanc recently hosted investor meetings with senior management from WMT.
The analysts wrote that their view is supported by share gains in key categories, such as grocery and digital, accelerating growth from margin accretive businesses, and cost and efficiency benefits from automation.
"WMT's financial algorithm is improving as growth initiatives begin to scale and contribute to enterprise results. High-growth and high-margin initiatives include the advertising business, Walmart International (Flipkart and PhonePe), Marketplace, Walmart fulfillment services, and memberships," they wrote. "Recall, Walmart grew the advertising business 30% in 2022 to $2.7B. We estimate U.S. advertising revenues of $2.25B, with the business likely to break the list of top 10 advertising businesses in 2023 or 2024."
The analysts also stated that the continued strong comps at Sam's Club are encouraging as the banner begins a multi-year unit expansion, while its margins "should benefit from supply chain improvements and increased automation, improving operating efficiency, and lowering fulfillment costs."