Here's the thing with Walmart (NYSE: WMT ), the company and its investors know what it needs to do. They also know the costs aren't cheap. The fact that Walmart is getting on the right track drove shares higher into the start of 2018, but the cost and long journey is like what sacked WMT stock for most of the year so far.
Lately though, WMT stock has been rallying. It's putting investors in a precarious position ahead of its first-quarter earnings report on August 16th before the open. Impressively, shares have rallied off the lows, reclaimed prior support and is now above all of its major moving averages. So what are we going to do with Walmart?
Earnings Preview for WMT Stock
Analysts expect Walmart to earn $1.22 per share this quarter, up 13% year-over-year (YoY) from $1.08 per share. Analysts expect revenue of almost $126 billion, which is up 2.1% YoY.
Investors will want to hear management's thoughts on the future and where they see Walmart right now. They'll want to know how it's positioning itself against Amazon (NASDAQ: AMZN ) as well as against traditional retailers.
In a race among market caps, WMT stock has already lost. Amazon went from the profit-less online retailer to a near-$1 trillion conglomerate of online and retail dominance. Its acquisition of Whole Foods shows it has bricks-and-mortar potential and while not aimed directly at WMT's core demographic, it's something to take note of.
For its part though, WMT is no slouch. It's looking to various delivery and pick-up methods around the country and acquired most of the India-based e-commerce company Flipkart for $16 billion. Along with JD.com (NASDAQ: JD ), Walmart recently invested $500 million in Dada-JD Daojia, a Chinese online delivery platform.
Walmart is also getting into streaming content , which seems like an interesting strategy given Walmart's competition. It puts Walmart up against not just Amazon, but also Netflix (NASDAQ: NFLX ) and Disney (NYSE: DIS ). Is the sole purpose of it to hurt Prime, rather than be a robust success?
Valuing WMT Stock
For the full year, analysts expect Walmart to generate more than $514 million in sales. That's up 2.8% and should outpace growth for the current quarter. Next year, analysts expect an acceleration up to 2.9% growth for the full year.
Keep in mind, Walmart is reporting the first quarter of its fiscal 2019 year.
On the earnings front, analysts are looking for roughly 9% growth to $4.81 per share. In fiscal 2020 (next year), that growth is expected to grow just 3% though. The idea that Walmart hit its "trough" in fiscal 2018 could be encouraging investors to gobble up stock now. In other words, they may feel that the worst is over with Walmart even though it still has a long road ahead of it. It's important management tells a similar story on the conference call.
With these estimates, Walmart trades at roughly 19 times this year's earnings. Don't forget that WMT stock also pays out a 2.3% dividend yield. While not massive, it's not something to dismiss when contemplating a position.
Trading WMT Stock
If the worst is really behind Walmart, then WMT stock could continue to gravitate higher. Currently over all three major moving averages - the 50-day, 100-day and 200-day - Walmart looks much more attractive than it did in April and May.
It's also over the $88 to $90 level, a key move over resistance. As long as this level holds post-earnings, a gravitation back to $100 is certainly on the table. That will all but fill the gap from February and put WMT stock in a much more bullish standing.
It helps that we're entering the back-to-school season and the holiday season too.
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