Truist analysts made key adjustments to their ratings on Walmart (NYSE:) and Costco (NASDAQ:), upgrading Walmart to Buy while downgrading Costco to Hold in separate notes on Tuesday.
In the case of Walmart, Truist sees strong momentum in the retail giant’s ability to gain market share across income levels.
“Walmart continues to gain share across income levels due to its focus on price, convenience, and assortment,” the firm states.
They explain that the company’s growth is being driven by higher-margin revenue streams such as advertising, membership, and its marketplace, which are not only boosting profits but also expanding price gaps, helping Walmart further capture market share.
As a result, Truist views Walmart as both an “offensive and defensive mega-cap,” arguing that the company deserves a “far higher-than-historical valuation.”
With this optimistic outlook, Truist has raised its price target for Walmart to $89, up from $76.
Meanwhile, Costco has been downgraded from Buy to Hold, with Truist citing several reasons for the change.
“The business remains strong, it is gaining share vs. virtually all classes of trade and likely has the highest barriers to entry in all of retail, in our view,” said Truist.
However, the firm notes that recent operational changes—such as the introduction of ID scanning at store entrances and packaging changes to its chickens—could create some sales friction.
Moreover, the note emphasizes that key catalysts for Costco are “in the rearview mirror,” and the stock’s valuation has become stretched, trading at about 54 times forward earnings, a “multi-decade high.”
With Costco’s stock rising approximately 60% over the past year, Truist concludes that the valuation leaves “little room for error” and prefers to seek a more attractive re-entry point.
