Wal-Mart Upgraded on Potential for Growth

NEW YORK (TheStreet) -- As if its dominance in the U.S. wasn't strong enough, Wal-Mart Stores'(WMT Quote) growing presence overseas will continue to make the retail behemoth a force to be reckoned with -- or so says HSBC analyst Francisco Chevez.

As a result, Chevez upgraded the discounter to outperform, sending shares in the company up 1.5% to $50.92 in afternoon trading.

Wal-Mart, says Chevez, will continue expanding in such emerging markets as Brazil, India, China and Russia by 2011, resulting in international growth that will one day outpace that in the states.

Chevez cited Wal-Mart's Mexican operations, called Walmex, as an example of the kind of international growth one can ultimately expect to see from Wal-Mart. Walmex currently accounts for nearly 5% of the company's total revenue.

But when it comes to domestic growth, it seems Wal-Mart is nearly tapped out.

Last week, UBS named Wal-Mart one of its top picks among staples retail. But while Wal-Mart has been able to capture a wide market amid the recession as shoppers look to save money, the bank noted that, upon the end of the recession, the company may well adopt another form.

"Wal-Mart's strategy could now evolve from collecting all this traffic and making sure stores look nice to protecting the basket size, which means a greater focus on consumables to avoid [same-store sales] decline," UBS wrote in a research note.

According to UBS' survey, 73.6% of respondents said they spent the most money in Wal-Mart in August, up from 71.1% in July.

-- Reported by Jeanine Poggi in New York

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