Advertising Could be a $2B Profit Stream for Walmart (WMT) - Morgan Stanley

Morgan Stanley analyst Simeon Gutman reiterated an Overweight rating and $156.00 price target on Walmart (NYSE: WMT) after the company announced a name change to its advertising unit, now called Walmart Connect. WMT's expanding and more integrated advertising offering, has three main pillars. 1) Advertising via the company's digital platforms (walmart.com and the walmart app); 2) A new closed loop TV network spanning WMT's 170K+ (self checkout and TV wall) screens in US stores (similar to traditional "out of home" advertising), and 3) A new partnership with The Trade Desk (a platform that optimizes ad spend for ad buyers.

The analyst estimates that Walmart Connect, in 2025, could generate $4b in revenues (vs. ~$500m today) and nearly $2b in EBIT (~8% of 2020e profit). He stated "We think ad revenue/profitability is an underappreciated source of stock upside. Though we aren't changing our estimates today given WMT's relative newcomer status in the digital ad space, ad spend (and the incremental profitability that it brings) represents a meaningful way for WMT to offset EBIT/margin pressure from retail sales moving online".

For an analyst ratings summary and ratings history on Walmart click here. For more ratings news on Walmart click here.

Shares of Walmart closed at $143.40 yesterday.

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