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When Wal-Mart Stores Inc. (NYSE: WMT) reported its fiscal fourth-quarter results late in February, they made a good impression on most analysts. Increasing same-store sales seemed to be the headline of the report, and most think they will continue expanding with this mega-store going forward. Merrill Lynch is in agreement with the consensus. but the firm pointed out a few key factors in its report.

Merrill Lynch maintained a Buy rating with an $88 price target, implying an upside of nearly 26% from Monday’s closing price of $69.95.

Wal-Mart is the world’s largest retailer, and in its fiscal fourth quarter the company reported better-than-expected US same-store sales of 1.8%, which was well above consensus of 1.3%, in a very challenging retail environment that saw many retailers report negative same-store sales.

Three things stood out in the fourth quarter that give Merrill Lynch confidence that Wal-Mart’s core U.S. strategy will continue to work in fiscal 2018, including:

• Traffic comps of +1.4%.
• US e-commerce GMV growth of 36%.
• Low-single-digit comps in grocery despite a -90 basis points impact from food deflation.

Merrill Lynch actually commented in its report:

We believe WMT is embarking on a period of sustainable 20-30%+ e-com growth driven by: (1) acquisitions (Jet/Hayneedle, Shoebuy, and Moosejaw so far) that provide access to more upscale customers and new technologies; (2) marketplace expansion (now over 35MM items from 8MM in Jan. 16); (3) continued Walmart.com initiatives, including free two-day shipping on purchases of $35 or more for over 2MM items (previously required a $50 membership); and (4) expansion of online grocery pickup “Walmart Grocery” to roughly 1,200 stores in F18 from 600 currently.

The brokerage firm continued with its investment rationale. Earnings growth should return in fiscal 2019 on 1% or more U.S. same-store sales, traffic driving initiatives, better merchandising execution globally, price investments, and a more integrated e-commerce business. Also longer-term global sales and profit growth should return as Wal-Mart leverages its significant investments in people, technology and price.

Shares of Wal-Mart were last seen up 1.3% at $70.82 on Tuesday, with a consensus analyst price target of $74.37 and a 52-week trading range of $62.72 to $75.19.