Following up on today's Daily Rundown video here, we are upgrading our Walmart (WMT) rating to a ONE.

Shares have been a big underperformer year to date and have done little since we trimmed our position and downgraded our rating to a Two at $140 in our Alert here. But this underperformance could mean an opportunity for the future because the stock has gotten very cheap while the fundamentals have remained strong.

Take for example what analysts at Citi said today in a research note. The analysts, who have a huge $179 price target on Walmart, wrote this morning that they believe "WMT is emerging from the pandemic stronger than ever. The core business strength was evident in 1Q results, and over the next several years we expect strength to be driven by growth in additional higher-margin profit streams such as advertising, fulfillment services, marketplace and FinTech."

Citi also analyzed Walmart through the lens of sum-of-the-parts to better understand how the core Walmart was being valued along with additional profit streams like Sam's Club and ownership stakes in Walmex, JD, Massmart, and Flipkart. When they backed out their implied valuations on these five separate businesses, what they found in their work was that the core Walmart trades at a significant discount to its peers. In fact, Citi believes the core Walmart trades at about a 10.4x 2021 EBITDA multiple compared to a peer group consisting of Costco (COST) , BJ Wholesale (BJ) , Dollar Tree (DLTR) , Dollar General (DG) , and Target (TGT) that trades at about 13x. We think this is too big of a discount given the quality nature of Walmart and the market share gains over the past year.

Additionally, we are surprised by how poorly Walmart has traded since the company exceeded first-quarter earnings estimates by a wide margin and raised its full-year outlook last month. We thought the beat and raise would have been a catalyst to a rally because one of the main reasons why WMT traded as low as it did in March was because management initially guided 2021 as a down earnings year. There was also a belief that Walmart was losing share in grocery. But Walmart put both narratives to rest after posting that strong first-quarter earnings result, even in the face of elevated capital expenditures.

Bottom line is that we like the opportunity here to pick up WMT shares with it trading right around the levels from when the company reported that fantastic quarter. We also think the stock has gotten too cheap with the multiple trading at a big discount to peers. We are upgrading our rating back to a ONE.