Walmart's worst day in nearly five years has created a buying opportunity, according to Deutsche Bank, which sees growing businesses beyond traditional retail helping lift the stock.
Deutsche Bank analyst Krisztina Katai sees higher inflation, expanding profit margins, and more disclosures from management about gross merchandise volume as factors that could propel the stock higher.
The firm upgraded Walmart stock to Buy from Hold on Thursday, raising its price target to $136 from $113, suggesting 17% upside from Wednesday's closing price of $116.16. Shares of Walmart rose 1.9% to $118.42 Thursday, extending the rally from Wednesday when shares closed up 3.5%.
The upgrade came after Walmart stock plummeted following the release of its second-quarter earnings on Aug. 20, which revealed that lower drug prices resulting from federal regulations passed during the Biden administration dampened U.S. same-store sales. The stock dropped about 9% that day.
U.S. same-store sales grew just 2.6% during the three months ending in July, marking the slimmest increase since early 2020 and falling short of analysts' estimates of around 3.8%, according to FactSet.
Since the earnings release, Walmart stock has received three downgrades and 16 price-target cuts, compared with only two price-target increases and two upgrades.
Same-store sales growth is a common metric for evaluating retailers. While Walmart has long been known as a traditional brick-and-mortar retailer, it has shifted toward an Amazon-like platform by expanding its online product catalog and membership services to lock in customer loyalty.
Katai thinks it's time to also start analyzing the numbers that way.
As services, advertising, and third-party marketplace sales become a larger part of Walmart's business, she thinks looking only at revenue and same-store sales growth doesn't capture the full picture.
Instead, Katai thinks gross merchandise volume will become a "more important lens" for evaluating Walmart's growth and market-share gains.
Another opportunity for Walmart lies in its profit margins. Katai wrote that its higher-margin revenue streams from e-commerce marketplace fees, retail media advertising, and membership fees have grown faster than low-margin core grocery sales. This growth, combined with automation in warehouses and distribution, should expand overall profit margins.
The hotter-than-expected inflation report released Wednesday likely pushed investors to cash in on essential retail stocks, such as discount giants and grocers Walmart and Costco, as a safe haven from broader stock market turbulence.
Katai joined a chorus of Walmart bulls on Wall Street. The average rating on Walmart stock is a Buy with an average price target of nearly $129, according to FactSet. Of the 48 analysts covering the stock, 88% recommend buying shares.
Walmart stock had risen 4.3% this year as of the close of trading Wednesday, according to Dow Jones Market Data. Shares had underperformed the S&P 500, which had gained nearly 13% this year.
But Walmart still dominates the retail sector, and its growing ancillary revenue streams should help it maintain strong momentum. Shares have risen 9.8% since Barron's recommended buying the stock on Sept. 9, 2026.
Shares of Costco gained 0.8%, while BJ's Wholesale Club rose 0.1%.
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