Could Walmart Be The Ultimate Beneficiary Of The Retail Massacre?

Many investors are shying away from the retail space and even shorting many names given the intense competition. But one company that's struggled in recent years, Wal-Mart Stores Inc WMT, appears to be well-positioned to benefit from the ongoing turmoil.

The Analyst

Oppenheimer's Rupesh Parikh maintains an Outperform rating on Walmart's stock with an unchanged $100 price target.

The Thesis

Walmart is scheduled to report its third quarter results ahead of Thursday's market open, and the retail giant should at the very least match consensus estimates including a 1.5-2 percent U.S. comps gain, Parikh said in a Wednesday note. (See Parikh's track record here.) 

The third quarter report should also show improvements in grocery sales due to better execution, price investments, higher food inflation and online initiatives, the analyst said. 

Walmart is "well-positioned" to gain market share from ongoing "turmoil" at struggling rival Sears Holdings Corp SHLD and Toys R' Us' bankruptcy filing, the analyst said. Oppenehimer projects that Walmart will gain market share, which in turn will add "clout with key vendors" who require adequate brick-and-mortar disruption, Parikh said. 

Walmart's sales and earnings growth could continue beyond the third quarter and U.S. comps could move higher due to an improved consumer spending backdrop, improvements in execution and e-commerce initiatives, Parikh said. The stock deserves to trade at a premium valuation given the potential for accelerating financial metrics, according to Oppenheimer. 

Price Action

Shares of Walmart were trading lower by around 1 percent Wednesday morning but are up 30 percent since the start of 2017.

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