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Walmart Joins Goldman Sachs Conviction List; Target Removed

Goldman Sachs 'remains constructive on fundamentals' for both Walmart and Target 'into 2022,' wrote analyst Kate McShane.

Walmart  (WMT) - Get Walmart Inc. Report shares rose Tuesday after Goldman Sachs placed the titanic retailer on its Americas Conviction List, while removing peer Target  (TGT) - Get Target Corporation Report, whose shares also gained.

“We are adding buy-rated WMT to the list and removing buy-rated TGT, while remaining constructive on fundamentals for both companies into 2022,” wrote Goldman analyst Kate McShane.

“We believe WMT was one of the strongest stories at the Goldman Sachs Retail Conference in September, given the company’s improving ability to grow [earnings before interest and taxes] along with continued investments, which … will gain investor attention as the company executes over the coming year.”

Walmart recently traded at $144.32, up 1.9%. It has eased 1% year to date amid fierce competition in the retail industry.

McShane has a price target of $184 for the stock of the Bentonville, Ark., company.

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“After the recent stock underperformance as we think the company is in a position to take share and do it more profitably into 2022,” McShane said.

“We think WMT is in a position to grow EBIT dollars along with continued investments due to the greater scale of its e-commerce business, improving mix and growth from higher margin ancillary businesses like advertising.”

As for Target, the stock has more than doubled (up 140%) since it was added to the Conviction List on March 3, 2020. The performance compares with a 49% gain for the S&P 500 over the period, McShane said.

But she still likes the Minneapolis company because of market-share gains, improved gross margin, a solid inventory position in the second half and a compelling valuation.

McShane has a price target of $281. Target recently traded at $256.21, up 1%.