UBS is bullish on the company's future earnings growth due to "enhanced productivity loop, e-commerce scale, and accelerated technology deployment."
Those three factors should be enough for Walmart to achieve earnings per share of more than $6 in fiscal 2023, according to analyst Michael Lasser, vs. consensus estimates of EPS of $5.80 per share.
Lasser also sees "several sources of additional upside" for Walmart as it develops traction in healthcare and advertising, and sees success in key markets like India.
"Besides, WMT offers the prospect of best-in-class consistency in an uncertain environment. We believe these elements will enable WMT's shares to maintain a premium multiple, especially as the gap between the leaders and laggards in retail widens," Lasser said.
Walmart's U.S. e-commerce business could see 25% growth with 3% growth in comps and 6-8% EBIT growth. UBS estimates that for every $4 million the retailer invests in its stores, Walmart can expect a 70 basis point bump in operating margin at that location.
"WMT has done a lot right in recent years. It's improved execution and successfully changed the narrative of its story from that of a mature brick-and-mortar retailer to being a viable #2 in e-commerce," Lasser said.
On the other hand, Lasser expects "Walmart's robust online infrastructure helped to position it as a go-to destination for both existing and new online shoppers during Covid-19."
Walmart shares were rising 1.2% to $121.22 in pre-market trading Monday and are up 0.8% this year.