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Michael Fowlkes' Analyst Insights

Options and ETF Analyst Writer
Michael Fowlkes
Author Bio


Wal-Mart to report its quarterly numbers

Michael Fowlkes

5/12/2018 11:54 AM

What's Happening

Retail giant Wal-Mart (WMT) will report its first-quarter results on May 17. The company will report its quarterly numbers before the market open, with the consensus calling for earnings of $1.13 per share. During the same period last year the company earned $1.00 per share, and the stock has lost 15.9% on the year.

Technical Analysis

WMT was recently trading at $82.93, down $27.05 from its 12-month high and $9.80 above its 12-month low. Overall technical indicators for WMT are beairsh but shares have been trading sideways for the last three months. The stock has recent support above $83.00 and recent resistance below $87.50. Of the 24 analysts who cover the stock, 10 rate it a “strong buy”, and 14 rate it a “hold”. WMT gets a score of 40 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

After a very bullish two-year run, WMT has come under pressure in 2018, with shares trending steadily lower after hitting an all-time high in January. The company reported mixed Q4 results in February, and the earnings miss drove shares lower, and they have yet to reverse course. Wal-Mart has done a good job growing its e-commerce business, and investments in its employees have resulted in a better customer experience, but the better than expected revenues were not enough to outweigh investor disappointment in the earnings miss. Traders will be watching not only the earnings for the quarter, but signs as to the health of the company’s online business. E-commerce has become a driving force in retail, and while Wal-Mart has done a good job improving its online segment, it needs to continue showing improvements for traders to resume a bullish stance on the stock. The street expects a small earnings beat with a whisper number of $1.15 versus the consensus $1.13, but also keep a close eye on online sales growth as that will be just as important as the company’s bottom line. WMT trades at $82.93 with an average price target of $102.90.

Stock Only Trade

If you're looking to establish a long stock position in WMT, consider buying the stock under $83.00. Sell if it falls below $74.75 or take profits if it gets to $95.50.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a June 70/75 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (66.6% annualized*) and the stock would have to fall 9.2% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a June 90/95 bear-call credit spread for a $0.45 credit. That's a potential 9.9% return (103.1% annualized*) and the stock would have to rise 9.0% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a July $85 covered call. Buy WMT shares (typically 100 shares, scale as appropriate), while selling the July $85 call for a debit of $80.25 per share. The trade has a target assigned return of 5.9%, and a target annualized return of 31.1% (for comparison purposes only). 


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