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Walmart's Potential to Grow Market Share in the Grocery Business: Piper Sandler Upgrade
Piper Sandler upgrades Walmart to overweight
Piper Sandler has upgraded Walmart to overweight from neutral, stating that the retail giant has a chance to expand its market share in the grocery business. The firm has also raised Walmart's price target to $210 per share, which represents a 32% upside from its previous close. Analyst Edward Yruma from Piper Sandler believes that as grocery inflation eases, Walmart will be able to capture a larger share of the market. The company's focus on price and its efforts to undercut competitors by stepping up rollback efforts on grocery store items are likely to contribute to its market share growth.
Continued pressure on vendors
Yruma suggests that vendors are facing increasing pressure on volumes, partly due to private label share gains. To regain share, vendors are employing rollbacks, and Yruma's store checks indicate a significant year-over-year increase in rollbacks. This trend is expected to intensify, thereby amplifying Walmart's competitive advantage in terms of pricing. The retailer's strategy of offering lower prices through rollbacks is likely to attract younger consumers who are becoming more cost-conscious, especially as student loan payments are set to resume.
Favorable analyst sentiment
Walmart's stock has already climbed more than 12% in 2023, and Yruma's upgrade aligns him with the majority of analysts covering the stock. Refinitiv data shows that out of the 44 analysts, 37 have either a buy or strong buy rating on Walmart. This positive sentiment reflects the confidence in Walmart's ability to continue its growth trajectory in the grocery business.
Conclusion
With Piper Sandler's upgrade and a favorable outlook from analysts, Walmart has the potential to significantly increase its market share in the grocery business. The easing of grocery inflation and the retailer's focus on competitive pricing through rollbacks are expected to attract more customers. As younger consumers become more cost-conscious, Walmart's strategy aligns well with their preferences. These factors, combined with Walmart's strong position in the retail industry, make it a promising stock for investors.
Hot Take: Impact on New Business
The upgraded potential of Walmart to grow its market share in the grocery business, as indicated by Piper Sandler, has significant implications for new businesses looking to enter the industry. With Walmart's focus on competitive pricing, rollbacks, and the favorable sentiment from analysts, it becomes increasingly challenging for new players to establish a foothold in the market.
One key consideration for new businesses is the pricing strategy. Walmart's ability to offer lower prices through rollbacks gives them a competitive advantage that can be difficult to match. As younger consumers, who are more cost-conscious, gravitate towards Walmart for their grocery needs, it becomes crucial for new businesses to find alternative ways to differentiate themselves. They may need to explore unique product offerings or specialized services to attract customers who prioritize quality or convenience over price.
The dominance of Walmart also puts pressure on vendors, leading to increased competition and tighter margins. For new businesses partnering with vendors, negotiating favorable terms and securing reliable supply chains becomes more challenging. Additionally, new businesses may find it hard to gain visibility and shelf space in Walmart stores, which are typically limited for smaller brands or niche products.
Despite these challenges, the growth potential in the grocery business remains significant, driven by consumer demand. New businesses should focus on identifying niche markets, leveraging digital platforms, and offering differentiated experiences to target specific customer segments. Building strong brand recognition and customer loyalty can also help new businesses establish themselves in the market, even in the presence of giants like Walmart.
In conclusion, Walmart's growth potential in the grocery business presents both opportunities and challenges for new businesses. While it may be difficult to directly compete with Walmart's pricing strategy and market presence, new businesses can still thrive by carving out their own niche, focusing on unique value propositions, and developing strong customer relationships.
Article First Published at: https://www.cnbc.com/2023/07/25/walmart-can-rally-more-than-30percent-as-it-gains-grocery-market-share-piper-sandler-says.html.svg)
