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Call of the Day: Goldman Upgrades Target / Downgrades Walmart

It's rare that we get to speak with Goldman Sachs but on Monday analyst Adrianne Shapira revealed why she's bullish Target and not Walmart in a live interview!

Looking at her call, Shapira upgraded Target to ‘Buy’ from ‘Neutral’ with a $62 price target and downgraded Walmart to ‘Neutral’ from ‘Buy’ with a $60 price target.

The moves seem somewhat counter intuitive considering she cites an improving economic environment as a catalyst – you’d think that would have a similar impact on both names.

However, Shapira thinks Target is better positioned. Here's why:

Target
-Best Positioned Retailer on Improving Middle Class
-Specific Programs to Drive Growth (P-Fresh Remodels & 5% Rewards Program)
-Disappointing Dec. Sales Offer Attractive Buying Opportunity
Source: Goldman Sachs

And in our live interview she tells us consumers have really changed the way they spent in the downturn.

"We went from aspirational to desperational."

However, as the middle class starts to feel better, Shapira has noticed shoppers balancing frugal with frivolous. In turn she tells us, that trend presents an "opportunity in mid-tier retailers with Target hitting that sweet spot.”

And on the flip side we also talked with Shapria about Walmart.


Walmart
-Lower-End Consumer To See Less Improvement From Economy-Limited
-Opportunity For Growth Based on Size
-Budding Food Inflation Limits Margins Upside
Source: Goldman Sachs

She tells us, “As things get better Walmart tends to lag."

That's largely because Walmart customers tend to be extremely price sensitive as they struggle to stretch their paychecks.

"Higher gas prices are an issue and as inflation rears its ugly head those customers tend to have a harder time absorbing those increases.”

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