Goldman Sachs is swapping out one big-box retailer for another.
The firm on Tuesday added Walmart to its conviction buy list, pointing to improved profitability and increased share of the U.S. grocery market.
At the same time, analysts removed Target from that list. The firm remains bullish on the stock but expects slower growth from the company next year more in line with its historical norms.
Goldman made the right call, according to Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors.
“Lido Advisors has made a similar trade,” Sanchez told CNBC’s “Trading Nation” on Tuesday. “We owned Target, now we own Walmart, and one of the reasons is actually similar to the Goldman Sachs explanation.”
Like Goldman, Sanchez says that Walmart’s investments in the e-commerce space and its strength in grocery are two reasons to be bullish on Walmart. That one-two punch — a beefed-up e-commerce presence and the necessity of brick-and-mortar locations for grocery shopping — is “important to the future of Walmart,” she said.
Inside Edge Capital Management founder Todd Gordon is more cautious, at least until Walmart’s technical set-up improves. Walmart has underperformed Target and the broader market in 2021.
“Since August of last year — which is when the two diverged; they were tracking on top of each other —Target is up 64% [and] Walmart’s only up 9%, compared to the S&P benchmark at 30%. So, it’s kind of a tough call to make,” Gordon said during the same interview.
The fundamental picture looks solid for Walmart, adds Gordon, with investments in e-commerce possibly ready to bear fruit. He says it could make sense for investors to put on a partial position on fundamental strength and add to it once the technicals strengthen.
“If we get through $155, you might see a breakout of trendline resistance, which is what happened in early 2019,” Gordon said.
The stock would need to add 7% to reach that level. Walmart closed Tuesday just under $145.
Disclosure: Lido Advisors holds shares of Walmart.
