Walmart's (WMT) long-term profitability is improving, supported by gains from high-margin digital advertising and seller fees in its third-party marketplace online channel, BofA Securities said Friday in a report.

The retail store chain is also experiencing broad-based market share gains, offering "strong value and digital convenience," the report said after the company posted a "strong" fiscal Q4.

BofA reiterated its buy recommendation on the stock and $120 price target. The firm trimmed its earnings per share estimates for fiscal years 2026 to 2028 in line with Walmart's long-term algorithm.

In fiscal 2026, BofA expects EPS of $2.65, down from $2.70, with 2027 at $2.90, down from $3, and 2028 at $3.10, down from $3.30.

Walmart's gross margin expansion is expected to continue "as growth in higher-margin ancillary businesses including digital advertising, 3P Marketplace and Fulfillment Services help offset sales mix headwinds," BofA said.

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