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Finance Walmart may have found the key to unlocking its online growth potential (WMT)

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Walmart announced it will roll out online grocery delivery to over 100 US cities, tapping into a way of reaching its online growth targets.

A worker prepares the check-out area at a newly built Walmart Super Center prior to its opening in Compton, California. play

A worker prepares the check-out area at a newly built Walmart Super Center prior to its opening in Compton, California.

(Reuters/Mike Blake)
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  • Walmart plans to hit a 40% US online growth target by 2019, and the company just made a move to get it there, a Credit Suisse analyst says.
  • The retail giant announced it will launch an online grocery delivery service in over 100 cities.
  • You can view Walmart's stock price here.

Walmart may have found a way to relieve its online growth concerns, as well as get it to its targets in the next two years.

The company plans to reach a 40% US online growth target by 2019. With the recent announcement that it will roll out an online grocery delivery option in over 100 cities, the retailer may get to those targets after all, Seth Sigman, an analyst at Credit Suisse, wrote in a note to clients.

This rollout will be available to around 40% of US households by the end of the year. Around 90% of Americans live within 10 miles of Walmart's brick-and-mortar stores, giving the company a significant advantage over its competitors. Due to its proximity to customers, Walmart could use its physical locations as a distribution hub to leverage its supply chain and provide faster deliveries.

Moreover, Walmart's online grocery delivery rollout will supplement the retail giant's ongoing expansion of grocery pick-up offerings, resulting in 2,200 stores that offer this service from 1,100 stores by this year. Sigman has been optimistic about the company's " target="_blank"click and collect" option — which allows customers to shop online through its website and pick up groceries at Walmart's physical locations — seeing it as an opportunity to drive incremental sales growth.

Coupled together, this is where the retailer can shine, Sigman says, because online grocery still remains "largely an untapped market."

"For WMT, given how early it is, we think it can lead the growth, and attain [online grocery] share well above their online market share today in other categories," Sigman said.

Yet he admits that online grocery delivery is getting more competitive. Amazon has been testing a two-hour grocery delivery service from Whole Foods in select cities while Target has acquired the delivery platform, Shipt, to help it expand its same-day delivery offerings across the US.

Still, the retailer's acquisition of Jet.com and the launch of free two-day shipping for orders over $35 or more in January will only serve to boost its chances of hitting its targets, Sigman says.

He has kept his "Neutral" rating on the stock, and maintained his price target at $102 per share.

Walmart's stock was trading at $88.04 per share, and was down 10.65% for the year.

Read more about why Walmart's 'Every Day Low Price' strategy could still pay off.