Investing.com -- Bank of America (BofA) on Friday reinstated coverage across the large-cap U.S. retail space, naming Walmart and Costco as preferred holdings while taking a more bearish view on Target.

BofA restarted Costco coverage with a Buy rating, arguing the warehouse retailer “is well positioned to remain a leader in this K-shaped economy.” The company benefits from strong appeal to higher-income shoppers while still attracting value-focused consumers through industry-leading pricing, analyst Christopher Nardone said in a note.

Costco’s strategy of reinvesting into price and wages supports continued share gains as shoppers “hunt for the best prices,” he added.

Executive memberships — roughly half of members but about 75% of revenue — remain a key strength. “We are keeping an eye on the modest slowdown in overall member renewal rates; that said, the shift toward a younger and more digitally savvy member expands Costco’s long-term value opportunity,” Nardone wrote.

E-commerce investments, meanwhile, were flagged as a main medium-term risk for Costco.

In a separate note, Walmart was also reinstated at Buy, with the bank highlighting sustained market-share gains across income cohorts. Nardone said Walmart is “gaining share with the upper income consumer through faster delivery offerings while also serving lower income consumers with everyday low pricing.”

The analyst pointed to the retailer’s $150 billion digital business, now 21% of sales and growing at a 23% two-year CAGR, calling the ecosystem the main reason to own the stock.

E-commerce profitability and incremental margins of 10–15% are expected to support earnings momentum over time.

“We believe a continuation of consistent sales growth and an acceleration in profit growth due to recent investments should lead to further positive EPS revisions and allow the multiple to grind higher,” Nardone said.

On the other hand, BofA reinstated Target at Underperform, citing a slower earnings recovery path and ongoing pressure in discretionary categories.

Nardone said consensus expectations for sustained positive comparable sales “may prove aggressive” and warned that margin investments on muted comps could delay EPS improvement.

Target’s apparel and home businesses — about 30% of sales — continue to lag and remain central to any turnaround, while competition from off-price players, Walmart and specialty retailers remains intense.