Introduction
Walmart Inc. (WMT) will report its fiscal results in the second quarter on Tuesday, August 18, before the start of the trading session. It is not expected to be a stellar quarter for the retailer with revenue expected to have decreased by 1.6% against the second quarter of last year. In comparison, revenue is forecast to be 3.7%. The mixed results could be one reason why the stock is struggling to move forward against a robust level of technical resistance. It may also be the reason that shares fall by as much as 10% in the weeks following these results.
The stock has seen its shares rise by roughly 30% since March, which underperforms the S&P 500’s broader climb of about 53%. The underperformance is a bit of a surprise, considering the jealous position of the company as a result of the pandemic and the healthy growth of its e-commerce business.
An inflection point
The graph can best tell the story, with the capital increasing in a long trading channel formed in June of 2018. The channel has made a series of well-defined higher altitudes and higher lows. But now the stock finds itself at an inflection point, unable to move toward a healthy level of technical resistance at $ 133. Walmart has hit that price on a few occasions since early April. However, it failed to push through. Shares could now drop to the lower end of the channel to around $ 120, a decline of almost 9.5%.
Options pricing is not in great motion
The options market is not a prediction of a colossal move for Walmart following results. The options for expiration on August 21 have an implied volatility of about 42%. This suggests that the stock could rise by about 5.8% or fall by 5.8% from the price of $ 132.86 on August 14th. It would have the shares in the trading range of around $ 124.90 to $ 140.30 at the end of the week. The last time the company reported results on April 30, shares fell just 1.6%.
Looking forward
Revenue for the second quarter is estimated at $ 135.25 billion. However, many investors will drive the growth of the company into their eCommerce unit. In the first quarter, the eCommerce unit saw a blowing increase of 74% over the previous year. Investors can focus their attention on any advancement the company can deliver. In the first quarter, the company pulled its outlook on full year. Analysts currently estimate third-quarter revenue at $ 131.83 billion.
Earnings for the second quarter are estimated at $ 1.25 per share, down from $ 1.27 per share last year. Estimates for the second quarter have risen to around $ 1.23 per share over the past two months. Analysts currently forecast third-quarter earnings of $ 1.15 per share, down from $ 1.16 in the third quarter of 2020.
If the company can succeed in surprising investors and delivering better than expected results, then there is no reason why the stocks can not resist by resisting $ 132 and continuing to create new highs. But with the company already trading with a forward PE ratio of 23 and a 5-year expected PEG ratio of 4.7, the shares are not cheap. It means the company needs to publish results in order to have the stock reaching those record highs.
Announcement: I / we have no positions in named shares, and no plans to initiate positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I do not receive compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose supply is mentioned in this article.
