10 Reasons To Buy Wal-Mart Stock: 'Battleship Is Starting To Turn As Execution Improves'

Jefferies’ Daniel Binder mentioned that store checks and Jefferies’ survey suggest Wal-Mart Stores, Inc.’s (NYSE: WMT) store improvements have been leading to improved store conditions, which are reflected in the Q1 sales results.

Binder upgraded the rating on the company from Hold to Buy, while raising the price target from $60 to $82.

10 Reasons To Own Wal-Mart

According to the Jefferies’ report, there are 10 reasons to own Wal-Mart’s shares.

1. “Investments in people, process, technology and stores is more evident and store standards are improving. Our confidence in improved execution is higher and we think sales momentum could improve further,” Binder stated.
2. The analyst expects the company’s “thoughtful price cutting” to drive sales growth. The price cuts are expected to be funded by improved inventory management, along with improved vendor terms and favorable overseas sourcing.
3. Better inventory management has already been leading to several benefits, such as the stores and backrooms being less cluttered, lower shrink, better markdown experience and meaningfully better free cash flow.
4. Sourcing in grocery has been improving, while helping to raise product quality and shelf life. Binder expects this to improve market share as well, with price investments and rollout of online grocery.
5. “In the last year mgmt. has pruned the store portfolio and slowed sq. ft. growth, which is translating to more profitable international stores and less cannibalization in the US,” the analyst noted.
6. Wal-Mart has also detailed the expense headwinds, which appear to be peaking in 2016.
7. The downward EPS revisions have ceased and are not turning positive.
8. “Expectations for a sustained turnaround are still not that high and we are in the early innings, so there is room for shares to move higher,” Binder pointed out.
9. Lower income households have also been witnessing better than average year on year wage improvements.
10. The analyst believes a turnaround at the company could attract more institutional ownership.

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