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Following Jet.com Acquisition, Barclays Says Wal-Mart's Primed For An Upgrade

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Following Jet.com Acquisition, Barclays Says Wal-Mart's Primed For An Upgrade
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Close on the heels of Wal-Mart Stores, Inc. (NYSE: WMT) closing its Jet.com acquisition, Barclays upgraded the biggest retailer stocks from Equal Weight to an Overweight rating and boosted the price objective from $70 to $87. This implies a growth potential of about 20 percent.

The brokerage believes that the company's turnaround is not priced and that the firm could see retailer regaining momentum. The retailer is one of the few companies to report EPS either in line or above estimates. In the last four quarters, its EPS topped between 1.0 percent and 11.4 percent.

In the recent past, Wal-Mart struggled to post revenue in line with the expectations. However, the most recent quarter witnessed a beat. The acquisition of Jet.com has further added to investments' sentiments.

Related Link: 4 Pieces Of Advice For Wal-Mart Now That Jet.com Acquisition Officially Closed

In a research note to clients, analysts led by Karen Short said, "Given that Walmart exhibits all of the traits of a Stable Staple (positive traffic, 2.8 percent dividend yield, 7.5 percent FCF yield, respectable lease-adjusted ROIC, positive traffic), yet is trading at a significant discount, we are assuming coverage with an Overweight rating and an $87 price target (32 percent upside)."

The brokerage has a upside target price of $95 while it kept a downside target price of $68 on the company's stock. Barclays places 30 percent probability scenario for the downside risks.

On the positive side, analysts listed continued comp and traffic trends, holding firm the stable staple of key metrics like dividend yield, free cash flow and optionality on balance sheet. Similarly, on the flip side, CAPEX increase, lack of alternate format, and reversal of trends or customer feedbacks are listed for the potential drag down of the stock.

In Friday's pre-market session, Wal-Mart shares were up 0.42 percent at $72.57.

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Latest Ratings for WMT

DateFirmActionFromTo
Oct 2016PiperJaffrayInitiates Coverage OnNeutral
Oct 2016Deutsche BankMaintainsHold
Sep 2016GuggenheimInitiates Coverage onBuy

View More Analyst Ratings for WMT
View the Latest Analyst Ratings

Posted-In: Barclays Jet.comAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Trading Ideas

 

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