Walmart’s stock will thrive as the tax cut raises incomes for its customers and at the same time, allows the world’s largest retailer to return more cash to shareholders, according to Goldman Sachs.

The firm on Thursday raised its rating for Walmart shares to buy from neutral and added the retailer to its “Americas Conviction List.”

“The firm’s strategic positioning remains compelling – selling consumables to middle-income consumers in small markets. Recent better results notwithstanding, retail is still subject to significant disruption, while Walmart, we think, is still very much in control of its own destiny,” analyst Matthew Fassler wrote in a note to clients. “We expect the mass market to benefit from stronger income growth, and from personal tax reform.”

Fassler increased his price target for the retailer to $117 from $115, representing 14 percent upside from Wednesday’s close.

The analyst noted tax reform will give an average annual benefit of $1,018 per tax payer filing. He said the tax relief as a percentage of income for the key income brackets in the $40,000 to $200,000 range will be 1 percent to 1.8 percent.

“We expect a meaningful dividend hike as the firm redeploys cash from tax savings, and repatriated overseas cash,” he wrote.

Walmart shares rose 1.7 percent in Thursday’s premarket session after the report.

— CNBC’s Michael Bloom contributed to this story.