Walmart stock has 26% upside as grocery and back-to-school sales set to soar, Bank of America says

• Walmart's stock could rise by 26% to $190, said Bank of America on Wednesday.
• The bank raised its price objective from $185 after Walmart's second-quarter results beat expectations.
• Stronger grocery sales and back-to-school shopping position Walmart for further growth this year, analysts said.

Walmart's stock price could increase by more than 25% with the retail behemoth well-positioned for growth this year, aided by a pickup in business in its grocery segment and people buying back-to-school supplies, Bank of America said Wednesday.

The investment bank in a research note said it sees 26% upside in Walmart shares, and raised its price objective to $190 from $185. The potential percentage gain is based on Tuesday's closing price of $150.70. The $190 target is the highest among major Wall Street investment banks that cover the stock.

BofA also reiterated its buy rating following Walmart's second-quarter earnings report, released Tuesday, that beat Wall Street's expectations.

Walmart said sales in its grocery segment rose by 6% during the quarter ended July 31 and that it increased market share according to Nielsen measurements.

"We think WMT's grocery share gains could accelerate as the environment normalizes and consumers revert from closer to home/smaller box shopping that favored supermarkets thru COVID," said BofA equity analysts Robert Ohmes and Kendall Toscano.

A rise in food prices could also drive customer traffic to value retailers such as Walmart, they said.

Walmart told investors it's seeing a "very strong" start for Back-to-School season. That activity along with easier general merchandise comparisons between Walmart's fiscal second half and its fiscal second quarter bodes well for the company, said BofA.

"Wage increases for lower-income consumers ... in 2021 could be a tailwind," the analysts said, noting that 1.5 million of Walmart's US employees often shop in its stores.

Walmart posted fiscal second-quarter adjusted earnings of $1.78 a share on revenue of $141 billion, ahead of Refinitiv estimates of $1.56 a share on $136.9 billion. Same-store sales in the US increased by 5.2%. The company also forecast fiscal year 2022 adjusted earnings of $6.20 to $6.35 a share, prompting BofA to increase its estimate to $6.35 a share.

Shares of Walmart slipped by 0.2% during Wednesday's session. The stock had risen by nearly 6% on a year-to-date basis through Tuesday.