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Although

Walmart

stock took a breather after the company’s recent earnings report, the shares are still up nearly 16% in 2020, reflecting its ability to gobble up market share during the pandemic. Cowen & Co. says the retail behemoth can keep winning.

Walmart (ticker: WMT) rose 4.5% to close at $136.63 on Thursday, on news it is joining

Microsoft

(MSFT) in bidding for the app TikTok. Yet analyst Oliver Chen says the shares are a win primarily because of the company’s more traditional businesses, especially as it invests in technology and its omnichannel platform.

That said, he still thinks the TikTok move makes plenty of sense, and adds to the company’s foundational strengths. “We acknowledge many operating and political details remain unknown, but view the potential acquisition as groundbreaking—as Walmart aggressively pursues what it means to be ‘customer centric,’” writes Cowen & Co.’s Oliver Chen.

Chen reiterated an Outperform rating and $155 price target on the shares Thursday, after his meeting with Tom Ward, Walmart’s senior vice president of digital operations.

There were three main takeaways from that discussion. First, Walmart’s early investments in online grocery has positioned it well, and should allow it to continue to deliver strong growth even after the threat of Covid-19 subsides. Chen’s own data shows that as much as half of all online grocery shoppers use Walmart, and the company’s huge network of more than 3,300 stores for pickup differentiates it significantly from rivals.

“Looking ahead, we expect the combined grocery and general merchandise app will result in bigger baskets, and higher productivity from a margin perspective as apparel and other categories will help improve gross margin.”

Secondly, he is optimistic about the company’s expansion of micro fulfillment centers, which are leveraging automation to the benefit of efficiencies and margins. This investment in technology is evident in his third point—Walmart’s use of artificial intelligence will improve customer satisfaction and order rates.

Machine learning is allowing Walmart to present product suggestions in real time to shoppers who visit its website, while allowing personal shoppers to make more accurate substitutions for out-of-stock products. “We view this is incredibly important as incorrect substitutions are some of the biggest painpoints in online grocery.”

Barron’s has also noted that Walmart is doing well amid the pandemic, as consumers consolidate their shopping trips and buy more at a smaller number of stores. If Walmart can keep these customers coming back even after the crisis ends, it could see a meaningful long-term lift.

Grocery is a big part of that equation. Because it was one of the last areas of retail that consumers were willing to move online for, new habits in this area could be stickier—leading to lasting sales gains for essential retailers providing this service. If Walmart were to roll out its

Amazon.com

(AMZN) Prime-like subscription service, that could further put it ahead in this category.

This all said, Chen i

Write to Teresa Rivas at teresa.rivas@barrons.com