By Sam Boughedda
Cowen analysts said the firm prefers Walmart (NYSE:WMT) over Target (NYSE:TGT) in a research note on Wednesday. The analysts raised the firm's price target on Walmart to $180 from $175 per share and cut Target's price target to $200 from $210.
They said Walmart has the advantage due to it being a defensive stock with innovation on the offense.
"We feel WMT is poised to benefit from grocery, low-prices & consumers trading into WMT amid inflation," wrote the analysts. "We appreciate WMT as a 'retail ecosystem' inclusive of alternative income streams from digital advertising & Walmart+. TGT's margins & inventory are a work in progress, but we are optimistic for 2023 on multi-category & digital scale."
Cowen also lifted its 2024 EPS target for Walmart to $6.80 from $6.55 (+4%) "on prospects of better sales trends and the likelihood of solid store traffic trends particularly in January."
"WMT's 22x FY2 P/E valuation is higher vs. TGT's 19x, but we prefer WMT's defensive 57% grocery mix combined with a retail ecosystem and platform innovation including connected & curbside customer experiences, digital advertising income stream, and Walmart+ memberships," the analysts added.
The key factors influencing Cowen's preference for Walmart over Target include WMT's solid growth in tickets and transactions, the increased trade down among wealthier consumers amid inflation, and margin protection through strong buying power and supplier negotiations.