KeyBanc Downgrades Walmart (WMT) to Sector Weight on Lack of Stimulus Tailwinds and Inflationary Pressure, Prefers Target (TGT); Etsy (ETSY) Upgraded to OW

January 20, 2022 7:02 AM EST
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KeyBanc analyst Edward Yruma downgraded shares of Walmart (NYSE: WMT) to Sector Weight from Overweight, while remaining Overweight on Target (NYSE: TGT).

“Since our initiation, WMT has undergone a transformation into arguably one of the strongest omnichannel U.S. retailers. However, we believe that the lack of stimulus tailwinds and continued inflationary pressure may disproportionately impact WMT’s “middle of the middle” U.S. consumer near term. WMT is also the largest private U.S. employer (2.3M+ employees), and we think wage pressure will continue to intensify. We stay Overweight TGT given its lower penetration of food (20% vs. WMT at 56%) and its higher-income consumer base. We remain positive on both long term as we think they will be continued share gains, but tactically we prefer TGT for 2022,” Yruma said in a client note.

Moreover, Yruma also upgraded Etsy (NYSE: ETSY) to Overweight as he believes the retailer offers “some of the most compelling long-term secular growth opportunities in our coverage.”

“We believe management set guidance reasonably for 4Q21. Our Key First Look Data has pointed to stable to improving q/q trends. Longer term, we are increasingly constructive on continued increases in habitual buyers (8M as of 3Q21) and potential TAM expansion via Depop,” Yruma added.

Elsewhere, KeyBanc also downgraded WW International (NASDAQ: WW) to Underweight and Carvana (NYSE: CVNA) to Sector Weight. On the other hand, Yruma upgraded Vroom (NYSE: VRM) to Overweight as he sees higher relative performance on the back of the “number of steps [taken] to improve the consumer experience.”

By Senad Karaahmetovic | [email protected]



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KeyBanc, Senad Karaahmetovic