We believe Walmart to be a defensive name that can withstand the pressures of the coronavirus pandemic that is at the same time transforming itself for the digital, post-pandemic world. While its scale is well understood and to a large part what allows the name to be so resilient despite a difficult macroeconomic environment, we believe investments into ecommerce are what will provide longer-term upside. On this offensive front, we believe multi-year investments in eCommerce (previously rolling Jet.com into the core online operation) and initiatives such as Walmart+ stand to increase engagement and customer loyalty. Moreover, we believe Walmart to have a strong foothold in the rapidly growing emerging Indian market via its majority ownership of Flipkart. Finally, we believe there to be a budding advertisement business that can leverage the company's omni-channel investments (and resulting data) that has yet to be appreciated by the market.

Shares have been a big underperformer year to date, but this underperformance could mean an opportunity for the future because the stock has gotten very cheap while the fundamentals have remained strong.

Take for example what analysts at Citi said recently in a research note. The analysts, who have a huge $179 price target on Walmart, wrote that they believe "WMT is emerging from the pandemic stronger than ever. The core business strength was evident in 1Q results, and over the next several years we expect strength to be driven by growth in additional higher-margin profit streams such as advertising, fulfillment services, marketplace and FinTech."

Citi also analyzed Walmart through the lens of sum-of-the-parts to better understand how the core Walmart was being valued along with additional profit streams like Sam's Club and ownership stakes in Walmex, JD, Massmart, and Flipkart. When they backed out their implied valuations on these five separate businesses, what they found in their work was that the core Walmart trades at a significant discount to its peers. In fact, Citi believes the core Walmart trades at about a 10.4x 2021 EBITDA multiple compared to a peer group consisting of Costco, BJ Wholesale, Dollar Tree, Dollar General, and Target that trades at about 13x. We think this is too big of a discount given the quality nature of Walmart and the market share gains over the past year.

Given the 2021 EBITDA of 39.26 billion, a desired 13x multiple would place the market cap of WMT at 510.38 billion. Given the 2.80 billion shares outstanding, the desired 510.38 billion market cap places the price of WMT at 182.3$ per share.