Walmart shares moved higher in premarket trading on Thursday after Deutsche Bank upgraded the retailer to Buy from Hold and lifted its price target to $136 from $113. The stock added 2.7% in early trading and has climbed more than 8% over the past week.
Analyst Krisztina Katai and her team at Deutsche Bank see a more constructive setup for Walmart as it heads toward 2027, pointing to the company's value proposition, potential market-share gains and opportunities to improve margins.
Inflation backdrop could favor Walmart
Deutsche Bank noted that the current inflationary environment could reinforce Walmart's competitive position as shoppers continue to prioritize value. The firm expects that dynamic to drive faster market-share gains, while investors increasingly look past pressure on the company's headline US comparable sales figures.
Katai said the firm sees a more favorable setup for Walmart as it approaches 2027, with pricing trends and market-share gains potentially supporting performance. The analyst team also expects Walmart's competitive advantages to strengthen as its business evolves beyond traditional retail.
Greater disclosure around gross merchandise volume (GMV), which measures the value of goods sold through a marketplace, could help investors better understand the development of its marketplace operations.
Upgrade follows investor meetings
The upgrade came after Deutsche Bank held investor meetings in New York City with Walmart Chief Financial Officer John David Rainey and the company's investor relations team. According to the firm, Walmart management remains highly confident in the underlying business and its long-term growth strategy.
Higher-margin businesses in focus
Deutsche Bank also sees room for Walmart to improve its incremental margins as higher-margin businesses expand faster than its core retail operations. The firm expects continued growth in areas such as e-commerce, its third-party marketplace, advertising and membership to support profitability.
It also expects the benefits of automation to increasingly contribute to Walmart's profit and loss statement. Katai said the combination of improving pricing trends, accelerating market-share gains and a strengthening business model could support the retailer's performance.
During the meetings, Walmart management highlighted some of its strongest recent food market-share gains, alongside continued momentum in e-commerce, marketplace expansion, advertising and membership growth. These areas are central to the bank's more positive assessment of the retailer's prospects.
However, the upgrade reflects the firm's expectations for the business rather than a guarantee of future share-price performance.
Analyst sentiment broadly positive
Deutsche Bank's upgrade adds to an already largely positive analyst outlook for Walmart. According to Koyfin data, 37 of the 43 analysts covering the stock rate it a Buy or Strong Buy.
The shares' recent gains and Thursday's premarket advance indicate renewed investor interest following the rating change. Walmart's ability to sustain market-share growth and expand higher-margin operations will remain important factors in the outlook outlined by Deutsche Bank.
This article is for informational purposes only and does not constitute financial advice.
