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Walmart Shares Poised for Growth, Says Credit Suisse
Investment Opportunities in Walmart
Credit Suisse has recommended investors to seize the opportunity to acquire Walmart shares ahead of the company's earnings report. The firm's analyst, Karen Short, has maintained an outperform rating on the stock and increased her price target from $170 to $180. This new projection suggests a potential upside of 12.3% from the stock's closing price last Thursday.
Walmart's Strong Position in the Current Market
Short believes that Walmart is well-positioned in the current market environment, displaying solid defensive characteristics. The company's value-driven, consumables-oriented business model is a significant strength, especially considering the volatile consumer backdrop and the ongoing, albeit slowing, inflationary pressures.
Anticipated Third-Quarter Earnings
Walmart is scheduled to release its third-quarter earnings report this Thursday before the market opens. Credit Suisse has raised its earnings per share forecast for the second quarter by 6 cents to $1.74, exceeding the consensus of $1.69, according to analysts surveyed by FactSet.
Factors Driving Walmart's Sales Momentum
Short expects Walmart to maintain its strong sales momentum, driven by several factors. These include robust grocery sales, which reflect market share gains from competitors and an increased number of rollbacks. Transaction gains, buoyed by consumers trading down, growth in private label products, and strong gains in health and wellness sales, supported by the boom in weight loss medication, are also contributing to Walmart's sales momentum.
Walmart's Profitability and Business Mix
From a profitability perspective, Walmart should have benefited from lapping excess markdowns from last year, supply chain productivity initiatives, and a favorable business mix. These factors should start to contribute in the second quarter and ramp up in the second half of the year, according to Short.
Walmart's Membership Program
Short acknowledges that these positive factors may be partially offset by Walmart's continued softness in general merchandise sales. However, she believes that Walmart stands to gain from the increasing number of sign-ups to its Walmart+ membership program. This program offers members free delivery from their store and member prices on fuel at select stations, among other benefits.
Conclusion: Implications for New Businesses
The positive outlook on Walmart's shares by Credit Suisse presents a compelling narrative for new businesses.
Learning from Walmart's Business Model
Walmart's strong market position, characterized by its value-driven, consumables-oriented business model, provides a blueprint for new businesses navigating a volatile consumer landscape and inflationary pressures. The company's robust sales momentum, driven by factors such as strong grocery sales and growth in private label products, can serve as a guide for businesses looking to boost their own sales.
Adapting to Market Trends
New businesses can also learn from Walmart's ability to adapt to market trends. The company's focus on health and wellness sales, for instance, is a response to the current boom in weight loss medication. This shows the importance of staying attuned to market trends and adapting business strategies accordingly.
Profitability and Business Mix
Walmart's profitability strategies, including lapping excess markdowns and supply chain productivity initiatives, offer valuable insights for new businesses seeking to enhance their own profitability.
Finally, the success of Walmart's membership program, Walmart+, underscores the potential benefits of such programs for customer retention and revenue growth. New businesses may want to consider implementing similar programs to attract and retain customers.
Article First Published at: https://www.cnbc.com/2023/08/11/credit-suisse-raises-walmart-price-target-ahead-of-earnings.html
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