BMO: Walmart target raised following key management discussions

Investing.com - Walmart Inc (NYSE:WMT) has received a significant boost from BMO, as analysts raised their price targets following detailed management meetings.

BMO analysts hosted investor meetings with Walmart CFO John David Rainey and the Investor Relations team in Toronto earlier this week, marking the retail giant as one of their top picks despite maintaining unchanged estimates.

"We believe Walmart's valuation can continue to move higher as the company demonstrates the durability and consistency of its earnings algorithm in the coming years," stated BMO analysts.

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The conversations revealed that Walmart is strategically positioned to grow its Earnings Before Interest and Taxes (EBIT) at a faster rate than its sales while still making continuous investments in its business.

BMO noted that Walmart is increasing its reputation for convenience alongside its long-standing image of value, enabling the company to engage with a broader spectrum of consumers in innovative ways. "The US consumer remains steady, value-focused, and selective," BMO commented on Walmart’s perspective.

A notable point of discussion was Walmart's potential to achieve profitability in its US ecommerce operations within the next one to two years.

This optimism is bolstered by a 40% reduction in delivery costs in recent quarters, ongoing supply chain automation which has seen costs drop by around 20%, and an increasing number of customers willing to pay for faster delivery options.

BMO pointed out, "Today, the view of ecommerce profitability is augmented by the growth of higher margin segments such as advertising, Walmart Fulfillment Service, and Data Ventures, all of which are expanding rapidly."

Furthermore, John David Rainey and his team reiterated a point made in June at the shareholders meeting about the company’s progress in supply chain automation. Fourteen to fifteen of Walmart’s 42 ecommerce fulfillment centers now incorporate some form of automation, further supporting efficiency and cost reduction.

BMO also elaborated on Walmart's plans to expand its consumer engagement through various initiatives, including its advertising potential, third-party marketplace, and membership program Walmart Plus. Additionally, discussions covered critical topics like rollbacks, freight and tariffs, and Walmart's ventures with Flipkart and PhonePe.

BMO analysts acknowledged that valuation has been a significant point of pushback from investors. However, they remain confident, noting, "In many ways, Walmart reminds us of Costco (NASDAQ:COST) shares from years ago."

This confidence has led BMO to raise the target price to $80, based on 30 times their unchanged fiscal 2026 earnings per share estimates.