On Friday, Walmart Inc. (NYSE:WMT) shares edged slightly lower despite receiving an upbeat rating from MKM Partners. The firm upgraded the stock to buy from hold, citing excellent inventory levels ahead of the holiday season. Analyst Willia Kirk also assigned a stock price target of $165, implying an upside potential of more than 16%, as of this writing.
The analyst also thinks the company has made significant progress towards building the Walmart-Plus subscription model. The company is also seen as the best-positioned should customers come more sensitive to rising inflation and fuel prices.
The firm thinks Walmart has more room left to run because it is trading about 20% above pre-covid levels whilst its closest peers have more than doubled.
The stock has swung into a net loss of about 3% this year and is down 6.5% over the last 12 months.
Is Walmart undervalued?
From a valuation perspective, Walmart shares trade at reasonable 12-month P/E and forward P/E ratios of 40.34 and 21.65, respectively. Therefore, the stock could be an interesting option for value investors.
On the other hand, analysts expect its earnings per share to grow at an average annual rate of about 8.12% over the next five years, compared to 0.80% in the previous five. Therefore, it could also gain the attention of growth investors.
The company’s forward dividend yield of about 1.55% could also attract dividend investors.
Source – TradingView
Technically, Walmart shares seem to be trading within a descending channel formation in the intraday chart. As a result, the stock has plummeted to trade closer to the oversold conditions of the 14-day RSI.
Therefore, investors could target rebound profits at about $145.57, or higher at $149.09, while $139.25 and $135.79 are support levels.
Walmart looks like a good buy
In summary, although Friday’s upgrade failed to rally the stock, Walmart still trades at reasonable valuation multiples whilst offering exciting growth prospects.
Therefore, with shares trading closer to the oversold conditions of the 14-day RSI, it could be a perfect opportunity to invest in WMT stock.
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