BofA Reinstates Coverage, Names Walmart Top Retail Pick Over Target

Bank of America reinstated coverage of large-cap U.S. retailers in a Feb. 27 research call, naming Walmart and Costco as Buys while rating Target Underperform and setting a $150 price target on Walmart. The call was led by analyst Christopher Nardone, who framed Walmart's digital ecosystem as the central rationale for the Buy stance.

Nardone called Walmart's digital business a roughly $150 billion operation and said it now represents about 21% of sales, growing at a 23% two-year compound annual growth rate. He wrote that e-commerce incremental margins of 10–15% should support earnings momentum and added, "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."

A separate market tactical note provided alternate digital figures, saying e-commerce represents 23% of total sales and was up 27% year over year, and it highlighted that Walmart’s AI-powered Sparky tool drives 35% higher average order value for users. That same note and other market summaries pointed to a $150 resistance level on the stock and quantified the implied upside to the BofA target at roughly 17% from Friday’s close, citing TipRanks data.

The research team and market notes also flagged a $100 million Federal Trade Commission settlement tied to Spark driver pay disclosures as a near-term regulatory and reputational overhang. Walmart, the summaries said, agreed not to misrepresent driver earnings, has compensated affected drivers and is taking steps to improve transparency on its platform; BofA characterized the cost as resolved and one-time even as tactical commentary warned it could act as a speed bump near the $150 mark.

Costco received a Buy with a different set of metrics: Nardone noted executive memberships account for roughly half of members but about 75% of revenue and cautioned about a modest slowdown in overall renewal rates. He added that a shift toward a younger, more digitally savvy member base expands Costco’s long-term opportunity, while also flagging e-commerce investments as a medium-term risk.

Target was reinstated at Underperform, with Nardone warning that consensus expectations for sustained positive comparable sales "may prove aggressive." The analyst pointed to Target’s apparel and home businesses, which are about 30% of sales and continue to lag, and said margin investments on muted comps could delay EPS improvement amid intense competition from off-price players, Walmart and specialty retailers.

Market reaction included late-session momentum in Walmart shares after the BofA note and a string of near-term catalysts: U.S. jobs and retail sales data due March 6 and upcoming reports from Best Buy and Target. BofA’s call ties Walmart’s Buy rating and $150 target to digital momentum and leaves those March data points as a concrete test of whether earnings revisions will follow.