Evercore ISI thinks it’s time for investors to consider scooping up shares of Walmart . Analyst Greg Melich upgraded the retail stock to outperform from in-line, citing normalizing inventory and improving traffic trends. “Management’s diligent work to pivot the business to omnichannel, divest non-core assets, and invest in productivity has positioned traffic and margins for upside over the next two years,” he wrote in a Thursday note to clients. “The traffic turn appears to be building, and with consumers across the demographic spectrum making wallet allocation choices after several years of record nominal retail spending, Walmart is poised to regain share.” The stock gained about 1.5% premarket on the upgrade. Year to date, Walmart is up 1.7%. Evercore ISI also lifted its price target to $160 from $145 a share, implying about 11% upside from Wednesday’s close. WMT YTD mountain Walmart shares so far this year The upgrade from Evercore ISI comes after the retail giant suffered a difficult 2022, with shares dipping 2% as it grappled with inventory gluts as high inflation shifted consumer spending habits. To be sure, that still outperformed the S & P 500’s 19% drop last year. Melich also justified his “not cheap” valuation on shares, which puts the stock at a 15% premium to the S & P 500 and at about 23 times a 2024 earnings per share estimate of $7. “That’s the middle of it’s 5-year range, the most relevant period as that is when reinvestment in the core/ tech initiatives under CEO Doug McMillon started to bear traffic fruit,” he wrote. “In terms of cyclical defensiveness, in ’07 we remember buying all the WMT we wanted at 14x, just before the stock outperformed and rerated to a big premium vs the S & P in [the first quarter of 2008].” While Walmart’s traffic lingers below pre-pandemic levels, Melich cited positive traffic over the last seven quarters as a sign that as “disinflation whacks U.S. retail sales Walmart’s comps could outpace the market’s deceleration from 7% to 3%.” At the same time, he added that investors are underestimating the company’s above average ranking on a slew of key consumer spending drivers poised to contribute to traffic gains, and offer upside potential. He also views the company’s Walmart+ platform as an offering that can engage higher income households and help double the households it reaches in the medium to long term. Difficult economic times also serve as an ideal time for engaging new customers, he noted. “We might be early, as the April analyst day could pose a risk if management tries to bludgeon the Street to their guidance range,” Melich wrote. “That said, with traffic momentum and margin expansion likely amidst a decelerating Retail world we like Walmart’s scale, balance sheet and stability.” — CNBC’s Michael Bloom contributed reporting