Shares of Wal-Mart (NYSE:WMT) climbed 1.5% in morning trading on Friday after Goldman Sachs (NYSE:GS) upgraded the company from “neutral” to “buy.” Goldman Sachs raised the company’s target price from $78 to $84 and added Wal-Mart to its Conviction List.
Wal-Mart is “as well positioned as any mass market retailer—in an admittedly imperfect world for mass market retailers,” Goldman Sachs wrote in a note to clients on Friday.
“[Wal-Mart] has seen the world quite clearly,” Goldman said. “Tactically, [Wal-Mart] has improved in-store execution visibly, tightened inventory, and kept pace with over U.S. retail [comparable-sales] momentum after years of lagging behind.”
This news comes after retailers and supermarket stocks have taken a hit from Amazon.com’s (NASDAQ:AMZN) announcement last month that it will acquire Whole Foods (NASDAQ:WFM) for $13.7 billion. Shares of Wal-Mart have fallen more than 6% since the deal was announced.
Goldman Sachs believes that Wal-Mart can complete successfully in the face of Amazon’s growth. Analyst Matthew Fassler said that Wal-Mart is prepared to “simultaneously sidestep the [Amazon] juggernaut” with the increasing demands of e-commerce and technology spending.
Earlier this week, Wal-Mart announced that it will launch the “On-time, In Full” program in August to fine suppliers for deliveries that arrive late, early, or improperly packaged. The retail giant expects this program to add $1 billion to revenue by improving product availability.
WMT remains a Zacks Rank #2 (Buy), with a VGM score of ‘A.’ Wal-Mart will need to continuously innovate its strategies to keep pace with Amazon, but our consensus estimates show that there will be positive year-over-year growth for the current year. The company is set to report its next quarterly earnings on August 17 before the bell.
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