Wal-Mart Stores Inc. (NYSE: WMT) has been one of the great American retail stories that has had its shares of ups and downs over the years. On top of just low prices, Wal-Mart is of course the largest retailer and private employer in America. Its shares have bounced off their recent lows, but are still down handily from their highs. Now Jefferies is telling its customers to be aggressive buyers in shares of Wal-Mart Stores.

Jefferies raised Wal-Mart’s rating to Buy from Hold, and the firm raised its price target to $82 from $60 in the call. Wal-Mart’s 52-week trading range is $56.30 to $75.20, but the stock had traded briefly at $90 at its peak in the past couple of years.

This new $82 price target was based on Wal-Mart selling at about 17.5 times the Jefferies fiscal year 2018 earnings per share estimate of $4.70. This was said to be above the three-year average of about 14.5 times. What drove the premium forward multiple here is that the retail giant is coming off of a period off heavy investment spending.

Daniel Binder, the Jefferies analyst leading the retail team, thinks the ship is starting to turn in this multiyear turnaround. Binder’s report said:

Based on our store checks and survey work, we believe Wal-Mart’s store investments are yielding broadly improved store conditions and first quarter sales results seem to confirm this. We think this improvement will be longer lasting and should lead to upside in sales and an upward earnings per share revision cycle. We think there are a few things that could move shares higher and improving US store sales momentum is the biggest and most impactful to the bottom line.

Jefferies offered its clients 10 reasons to own Wal-Mart shares:

1. Investments in people, process, technology and stores is more evident and store standards are improving. Our confidence in improved execution is higher and we think sales momentum could improve further.
2. Thoughtful price cutting could yield better sales results and is the next logical step. Funding this is better inventory management, better vendor terms and favorable overseas sourcing.
3. Improved Inventory mgmt. is showing many benefits, including less cluttered stores and backrooms, less handling, better markdown experience, lower shrink, and much better cash flow ($4 billion FCF in Q1).
4. Sourcing is improving in grocery and helping lift product quality and shelf life. Market share should also improve with price investments and the rollout of online grocery.
5. Rational store growth – In the last year mgmt. has pruned the store portfolio and slowed sq. ft. growth, which is translating to more profitable international stores and less cannibalization in the US.
6. WMT has laid out a clear view of expense headwinds and they are peaking this year.
7. Downward EPS revisions have stopped and now turning positive. We are ahead of the Street on sales, EPS and cash flow for the FY17 and FY18.
8. Expectations for a sustained turnaround are still not that high and we are in the early innings, so there is room for shares to move higher.
9. Lower income households are seeing better than average wage improvements y-y.
10. Institutional ownership of WMT shares has come down since 2008. A turnaround could attract greater institutional ownership given its heavy weighting in the S&P 500.

Binder did outline at least some of the risks here. After all, Wal-Mart has had a series of ups and downs, and it is not like the company can still say it is surprised by the growth of online sales. Binder’s risks included:

• Low-yielding returns on sales initiatives
• Sluggish international growth
• A growing mix of lower margin e-commerce sales
• Increased competition from direct brick-and-mortar competitors and online players

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Additional considerations were described in the report as follows:

Other Considerations Walmart has been investing in wages and training to improve the store experience last year and this year. The next step in the turnaround is investing in price, which is expected to begin this year before ramping up in FY18 and FY19. The online grocery (pick-up in store) rollout should accelerate ecommerce sales.

Wal-Mart shares were up 0.6% at $71.32 on Monday immediately after the opening bell. One thing some investors will want to consider is that this price is over $3.00 higher than the $68.23 consensus analyst price target.

As far as how this compares to the consensus valuations from Thomson/First Call, Wal-Mart shares are valued at 16.75 times the consensus $4.26 EPS for fiscal 2017 and 16.1 times the consensus $4.42 EPS for fiscal 2018.

Most retailers have fiscal year-end dates that sound like they are a year further out than retailers. It is because of the January year-end that is so common for most retailers. Wal-Mart’s fiscal year-end is in January of each year, so we are already well into its 2017 fiscal year.

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