Macro

JPMorgan Upgrades Walmart to Overweight, Cites Defensive Strength Amid Softening Consumer Spending

JPMorgan upgrades Walmart to overweight, targets 23% gain amid softening consumer environment and election uncertainties.

By Bill Bullington

6/10, 07:13 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Walmart Inc.
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Key Takeaway

  • JPMorgan upgrades Walmart (WMT) to overweight with a new price target of $81, citing strong defensive and offensive balance.
  • The upgrade reflects expectations of double-digit EPS growth, market share gains, and rising alternative profit pools.
  • With consumer spending softening and an uncertain 2H24 ahead, Walmart's stock is seen as a safer bet amid macroeconomic uncertainties.

Walmart's Strategic Upgrade

JPMorgan has upgraded Walmart to an overweight rating from neutral, raising its price target to $81, which represents a 23% gain from Friday’s close. This upgrade is based on a combination of Walmart's strong performance and a strategic shift towards defensiveness in a softening consumer environment. Analyst Christopher Horvers noted, "We believe the stock adds a strong balance of defense and offense on both the top and bottom lines in a soft (to softening) consumer backdrop with a highly uncertain 2H24 ahead." The firm expects Walmart to achieve multi-year double-digit EPS growth due to market share gains, rising alternative profit pool benefits, and a profit inflection in its International segment.

Strong Performance and Market Position

Walmart shares have surged 25% in 2024, significantly outperforming the S&P 500's gain. This rally was fueled by better-than-expected first-quarter results reported in mid-May, where Walmart also indicated it would hit the high-end of its full-year guidance, attracting more higher-income shoppers. The stock's robust performance underscores its resilience and strategic positioning in the current market. JPMorgan's upgrade also reflects a macroeconomic perspective, aiming to add more defensiveness to its ratings amidst signs of softening discretionary spending and an uncertain second half of the year.

Defensive Play Amid Uncertainty

JPMorgan's upgrade is partly driven by the need to adopt a more defensive stance given the current economic uncertainties. The note highlighted several factors contributing to this decision, including the presidential election cycle, a holiday calendar with five fewer days, and an unclear outlook on rate cuts. "We believe estimates remain beatable while there is the potential for an uptick in the multiple as we expect WMT to go on a multi-year double-digit EPS growth algo," stated Horvers. The firm maintained its 2024 EPS forecast of $2.57, above the Wall Street consensus of $2.43, and raised its 2025 EPS estimate to $2.86.

Street Views

  • Christopher Horvers, JPMorgan (Bullish on Walmart):

    "We believe the stock adds a strong balance of defense and offense on both the top and bottom lines in a soft (to softening) consumer backdrop with a highly uncertain 2H24 ahead... Moreover, we believe estimates remain beatable while there is the potential for an uptick in the multiple as we expect WMT to go on a multi-year double-digit EPS growth algo given market share gains, rising alternative profit pool benefits, and its International segment profit inflection."