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Investing.com -- Vusion Group shares are up about 40% year to date, driven by an accelerated rollout with Walmart (NYSE:WMT) and stronger-than-expected margin performance in 2024.
With the full Walmart contract now confirmed, BofA Securities has raised its price target to €275 from a prior level, citing improved visibility on recurring revenue and reduced midterm risk.
The brokerage maintains its “buy” rating and includes Vusion on its “What’s Big in SMID” Best Ideas list.
BofA now forecasts more than 35% sales CAGR through 2027, supported by Walmart’s large-scale deployment, which is expected to continue into that year.
Analysts also revised their EBITDA margin outlook higher, expecting VCM margins to exceed 33% by 2027, up from the previous 32% midterm target, driven by growth in recurring value-added services (VAS).
The faster-than-expected margin expansion seen in 2024 is attributed to increasing VAS revenue, which BofA believes can add up to 5 percentage points of VCM margin uplift over five years.
The price target revision also reflects a reduced weighted average cost of capital, now set at 12%, due to lower perceived risk following the confirmed Walmart contract and strengthening VAS contribution.
In the U.K., Vusion’s recently signed agreement with Co-op marks its largest-ever deal in the region.
The contract is expected to result in nearly 10 million electronic shelf labels (ESLs) and over €60 million in hardware sales across 2025–26.
BofA sees a significant total addressable market in the U.K., where most large retailers are still in pilot phases.
Tesco (OTC:TSCDY) and Sainsbury’s alone represent a market of more than 60 million ESLs, while the broader U.K. grocery sector exceeds 100 million.
Analysts view the likelihood of further large U.K. contracts as higher than in the U.S. in the near term, citing ongoing tariff uncertainty in the U.S. market.
Besides the Walmart rollout, BofA sees three ways to sustain growth. First, there remains untapped U.S. potential, as several tier-1 retailers have yet to sign ESL contracts.
Second, Vusion could expand Walmart deployment to its more than 5,500 international locations.
Third, the company could drive additional value by offering new services such as Captana to Walmart.
A full five-year Captana rollout could contribute more than €700 million in VAS revenue, according to the brokerage.