Walmart emerges as a 'true challenger' to Amazon after years of losing

  • Citi Research says it made a “big mistake” by underestimating Walmart.
  • “Walmart’s e-commerce operations are emerging as a true challenger to Amazon,” analyst Kate McShane wrote in a note to clients.
  • The firm upgraded Walmart from “neutral” to “buy” and raised its price target to $US117 from $US106.

A Wall Street firm says it has grossly underestimated Walmart this year.

Citi Research analyst Kate McShane upgraded Walmart from “neutral” to “buy” on Monday and said the firm made a “big mistake” by misjudging its competitiveness with Amazon.

“We sat on the sideline with this name in ’17, which proved to be a big mistake. Despite the stock’s run-up, we think there is even more to come, particularly considering Home Depot and Costco are trading at a premium to Walmart,” McShane wrote in a note to clients, CNBC reports. “Our belief that its aggressive omnichannel strategy will continue to drive significant sales growth and Walmart’s ecommerce operations are emerging as a true challenger to Amazon, both factors that could fuel further multiple expansion.”

McShane cited Walmart’s biggest strengths as its grocery offering, everyday-low-price positioning, and “increasingly-seamless integration” of its stores and website, saying all three would ensure strong traffic to stores.

McShane also raised her price target for Walmart shares to $US117 from $US106.

Walmart has been investing heavily this year in lowering prices and adding new services, such as ship-to-store discounts and curbside grocery pickup, to drive more shoppers to its website and stores.

After purchasing Jet last year for $US3 billion, the retailer went on an acquisition spree, snatching up ecommerce companies that appeal to higher-income customers like MooseJaw, ModCloth, Shoebuy, Bonobos, and Hayneedle.Walmart also recently struck a deal to give the high-end department store chain Lord & Taylor space on its website.

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