By Tonya Garcia, MarketWatch
Walmart Inc. was upgraded to outperform by Credit Suisse on Wednesday, earning its second upgrade of the week, as the coronavirus pandemic drives shoppers to their local grocers to stock up on food and necessities.
Credit Suisse analysts led by Seth Sigman said there’s more to it that a temporary benefit.
“We see this unfortunate period accelerating structural changes in consumer shopping, possibly by five-plus years, as they are introduced to new retailers and new shopping methods including online grocery and delivery, and further consolidate purchases at multi-category, multi-channel retailers,” the analysts wrote in a note to clients.
Long term, they are expecting a shift to more food being consumed at home.
“This change should be sticky, and favor Walmart, as it’s invested in its infrastructure, technology and people, to evolve its model,” analysts wrote. “In our view, Walmart is no longer just an early cycle, defensive, low-price player, as in prior cycles. Its market share growth story and this period should validate the changes it’s made.”
Credit Suisse raised its price target to $127 from $115.
Oppenheimer also upgraded Walmart /zigman2/quotes/207374728/composite WMT -0.01% to outperform this week. Oppenheimer has a 12-to-18 month price target of $125 on Walmart stock.
“As we look forward, we believe the company is well positioned to still deliver on financial targets, and shares could benefit from money flows shorter-term as investors likely continue to seek safety in a more uncertain global economic backdrop,” analysts led by Rupesh Parikh wrote.
“As we have written about previously, grocers have clearly benefited from consumer stock-up activities lately.”
Analysts also expect an economic stimulus program from the government, which should help Walmart shoppers, especially lower-income earners.
Walmart announced last week that it would cut operating hours at its stores and its Neighborhood Markets locations, with opening hours from 6 a.m. to 11 p.m. Some of Walmart stores are typically open 24 hours.
“We’ve got a lot of categories that have seen extraordinary growth levels in the past few weeks,” Walmart U.S. Chief Executive John Furner said in a video statement. “This started in over-the-counter pharmaceuticals, then food and consumables, and now it’s moving into our food businesses.”
Walmart announced on Thursday that it was giving all of its associates a cash bonus and aims to add 150,000 workers.
U.S. retail sales fell 0.5%, according to the most recent numbers, although UBS analysts note that some categories have rallied over the past couple of weeks.
“Household personal care (HPC) categories showed the strongest demand surge, with packaged food, fresh and beverages tracking relatively even for the last one-week and two-week periods,” analysts led by Steven Strycula wrote in a note.