Shares of Walmart (WMT) are on the rise after Goldman Sachs analyst Matthew Fassler upgraded the stock to Buy from Neutral, while adding it to his firm's Conviction List. Selling consumables to middle-income consumers in small markets remains a compelling strategic position, he contended, adding that he expects a "meaningful" dividend raise as the company redeploys cash from tax savings and repatriated overseas cash.

CONSUMER ECONOMY: In a research note this morning, Goldman Sachs' Fassler told investors he believes 2018 is setting up well for the consumer. The analyst noted he sees accelerating economic drivers aiding spending in 2018, with tax reform likely to spur further growth in consumption. Further, Fassler argued that the models year over year acceleration in apparel retailing, food retailing, casual dining, packaged food, and beverages, with consistent trends elsewhere, and outright like-for-like declines at any point in the year only for department stores. Nonetheless, he acknowledged that he does see a lower bar for the first half of the year, on easier sales comparisons as the consumer cycles a period of subdued activity following the 2016 presidential election, which was aggravated by delayed tax refunds and a mild winter.

BUY WALMART: Goldman Sachs' Fassler upgraded Walmart to Buy from Neutral, while adding the stock to the Americas Conviction List, telling investors that the company's strategic positioning - namely selling consumables to middle-income consumers in small markets - remains "compelling." Retail is still subject to significant disruption, but Walmart is very much in "control of its own destiny," he said. Fassler added that he expects the mass market to benefit from stronger income growth and from personal tax reform, and is modeling significant reinvestment of tax savings. The analyst told investors that he sees a "meaningful dividend hike" ahead as Walmart redeploys cash from tax savings, and repatriated overseas cash. Fassler raised his price target on the shares to $117 from $115.

PRICE ACTION: In morning trading, shares of Walmart have gained 1.2% to $103.92.