Wal-Mart Wins Fans

Shares jump as the retailer's plan to scale back growth leads to multiple Wall Street upgrades.
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(WMT) - Get Report

plan to rein in growth and cut spending won applause from Wall Street Monday, providing the struggling retailer's shares with yet another boost.

The company received a slew of upgrades after

announcing plans to reduce capital spending, slow its store-opening pace and buy back $15 billion in stock. Shares recently were up $1.35, or 2.7%, to $50.82, building on Friday's 3.9% rise.

Wal-Mart's plan comes as the company is facing stagnant growth and trouble attracting new customers. The stock has languished in the mid-$40s for much of the past year.

Morgan Stanley analyst Gregory Melich upgraded Wal-Mart's stock to overweight from neutral, writing that "despite many challenges, the myopic growth focus at

Wal-Mart appears broken."

"We expect increased clarity on the plan by year-end, including operating metric goals, capital structure, and altered management incentives from the board," Melich wrote.

Melich said his upgrade would be at risk if Wal-Mart's results got worse before they got better. He pointed out that Thursday's monthly same-store sales report is likely to be weak.

Peter Benedict, senior analyst at Wachovia, upgraded his rating on Wal-Mart to outperform from market perform, calling Wal-Mart's plans an "important inflection point" for the company.

"While we recognize that improvement in fundamentals are likely still a few quarters away, we think Wal-Mart shares will get a bit of a 'hall-pass'

near-term as investors focus on the benefits of his more disciplined approach to capital allocation strategy," he wrote.

Benedict said the plan should increase Wal-Mart's return on investment capital, with year-over-year improvements possible as early as next year.

"Ultimately," he wrote, "we believe this paves the way for multiple expansion for Wal-Mart in the months ahead."

Among the other Wall Street shops out with upgrades were HSBC, which lifted the stock to overweight from neutral; and J.P. Morgan, which also raised its rating to overweight from neutral.