“Target and Walmart shares have pulled back 12-13% and 7-8% respectively, since mid-August, likely reflecting industry supply chain concerns and the roll-off of consumer stimulus support,” wrote BofA analyst Robert Ohmes.
“Following our WMT/TGT investor relations catch-ups last week, we believe that both companies, while not immune to the current challenging supply chain and rising cost environment, are particularly well positioned relative to the broader competitive retail landscape heading into the holidays.”
- “WMT & TGT entered the third quarter with strong inventory positions.
- “Both retailers should benefit from more favorable port access, long-term container shipping agreements and chartered vessel capacity.
- “WMT & TGT should gain share from smaller competitors that lack scale and face more shortages.
- “A mix shift to more higher margin in-store (vs. on-line) purchases in the fourth quarter compared to last year should support gross margins.
- “WMT & TGT should see less labor cost pressure and shortages given that both companies” have been increasing wages over the last 18 months or so.
- “Impressive general merchandise momentum continues, as general merchandise spending has continued to grow 20% to 30% through September over 2019.
- “WMT & TGT continue taking share in food retail.
- “WMT & TGT should benefit from omni-channel leadership.
- “Valuations are more attractive following the recent pullback.”
The news didn’t have much immediate impact on shares of the two companies. Walmart shares on Monday closed down 01% at $139.53. Target's stock on Monday closed down 0.1% to $228.72.
BofA has price targets of $190 for Walmart and $317 for Target.