Goldman Sachs says Walmart is 'in control of its own destiny' despite retail's troubles

  • Walmart‘s stock jumped after Goldman Sachs upgraded the company to “Buy” from “Neutral.”
  • Goldman added Walmart to its “Americas Conviction List,” a group of the bank’s favourite stocks to buy.
  • Goldman said that Walmart will be a big beneficiary from the GOP’s tax reform law.
  • View Walmart’s stock price here.

Shares of Walmart popped on Thursday after it got a blessing from Goldman Sachs, which cited tax reform as a big boon for the stock.

Walmart was upgraded to “Buy” from “Neutral” and its price target was raised to $US117, up 14% from current levels. The company was also added to Goldman’s “Americas Conviction List,” a group of the bank’s favourite stocks to buy.

Though Goldman downgraded the stock last November, an improving economic backdrop is expected to support Walmart’s higher valuations, especially as tax reform is fully realised, Matthew Fassler, a Goldman analyst, said.

“Retail is still subject to significant disruption, while WMT, we think, is still very much in control of its own destiny,” Fassler said.

Given Walmart’s push into e-commerce and same-day delivery services through its acquisition of Bonobos, Jet.com, and Parcel, the analyst said that Walmart’s strategy to target middle-income consumers in small-markets is compelling.

Moreover, Fassler expects the recently passed tax reform law to boost consumers’ wallets, bringing stronger income growth and spurring spending at stores like Walmart.

The corporate tax cuts and repatriation of cash from overseas could also lead to Walmart reinvesting its tax savings and delivering a higher dividend to shareholders, Fassler said. Walmart has already announced it would raise wages and issue a one-time bonus to employees last week. Fassler projects that the tax cuts should add 10% to its price/margin above the 15% in wage growth.

Walmart’s stock was trading up 1.36% to $US103.95 a share on Thursday afternoon. It’s up 5.52% for the year.

Read more about how Walmart is taking action to increase its commitment to e-commerce here.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.