Will unionization worries weigh on Wal-Mart's stock?

Steven Senne / AP

Citigroup analyst Deborah Weinswig thinks so. She's downgraded Wal-Mart shares to hold from buy and lowered the retailer's 12-month price target to $48 from a prior target of $53, citing fears that proposed legislation intended to make it easier for employees to unionize will boost Wal-Mart's labor costs and hurt its ability to compete.

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[WMT  Loading...      ()   ] shares were recently trading higher as the Dow stocks posted their biggest point gains since late January. All 30 Dow components, including Wal-Mart, were trading up.

Still, as debate gets going in Washington, Weinswig suspects there is a threat that Wal-Mart shares could suffer.

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Wal-Mart, the world's largest retailer, is the No. 1 target for labor unions, she says. Not only would unionization bring a large number of new employees into the union fold, but the U.S. food retail sector has historically been unionized with the exception of Wal-Mart.

Rep. George Miller, a Democrat from California, is expected to introduce the Employee Free Choice Act, or "card check" legislation, into the House of Representatives as early as today.

The bill is a top priority for unions this year, and Weinswig estimates unions have already spent about $500 million lobbying for it.

"The bill would greatly simplify the process of union formation, limit the ability of employers to caution employees against unionization, and impose several restrictions on the bargaining process," Weinswig said in a research note.

Wal-Mart lives and dies by its low-cost advantage, which has been a huge plus for it during the current economic downturn. Consumers have been flocking to Wal-Mart, some for the first time, to take advantage of its lower prices.