Simeon Gutman, analyst at Morgan Stanley, reiterated the shares’ rating of “Overweight”. Walmart Inc WMT with a target price of $160.

The retail giant reported First Quarter Revenue $152.3 billion and adjusted earnings per share of $1.47, both beating consensus.

• Following the rise in US comparable WMT sales in the first quarter (+7.4% vs. consensus +5.1%), comparable sales in fiscal 2024 are now expected to grow slightly faster than the previous guidance of 2-2 .5%, the analyst said.
• From WMT’s point of view, price increases are becoming increasingly difficult to justify and the analyst believes that they are aimed not only at stabilization, but also at possible setbacks in future negotiations should suppliers’ costs also fall.
• That doesn’t mean retail prices are falling back to pre-COVID levels, but on a yearly basis some prices could turn deflationary, the analyst noted.
• Demand for general merchandise in e-commerce appears to be increasing in part due to WMT’s recent strategic changes by expanding seller and SKU counts, as well as increasing the number of sellers using fulfillment and advertising services, the said analyst.
• Gutman expects Walmart to stabilize from recent margin volatility in the second half of fiscal 2023 and have a chance to retake the business in fiscal 2024 as sales momentum in its core business continues.
• The analyst also sees a growing ability to balance longer-term investments with near-term returns, despite near-term challenges caused by a uniquely difficult inventory/mix backdrop.
• The weakening consumption, the low-risk earnings development in the 2024 financial year and the medium-term margin drivers make the investment case attractive, the analyst concluded.

price action: WMT shares trade 0.90% lower at $150.12 at last check on Friday.