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Walmart's Q1 Offered Compelling Data Points That Strengthen Bull Case on 2nd P&L Thesis, UBS Says

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Walmart's (WMT) Q1 offered compelling data points that strengthen the bull case on the 2nd P&L thesis, even as the company fell short against the heightened expectations for the quarter, UBS said in a research note.

The retailer's ecommerce growth rate is sustaining at mid-20% and more, with the company investing in distribution capabilities that look to bolster its competitive advantage, according to the Thursday note.

Walmart's key alternative revenue streams of marketplace and advertising are accelerating ahead of expectations, UBS said, adding that it believes there's a long growth runway in these businesses that will lead to significant margin expansion over time.

Noting that the company was able to internalize $175 million of incremental fuel costs and still posted 30 basis points of US gross margin in Q1, UBS said that "contribution from these lucrative streams will move from mitigating any exogenous drawback to more than compensating for them."

UBS lowered its price target to $141 from $147 and maintained its buy rating on the company's stock.

Price: $120.19, Change: $-1.15, Percent Change: -0.95%

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