Walmart Inc. (NYSE: WMT) stands on the precipice of its crucial Q4 earnings report, poised to unveil its performance amidst a complex retail landscape. Analysts anticipate adjusted EPS of $1.65 and revenue of $170.71 billion, reflecting a potential 4% year-over-year increase. While these figures are promising, the broader economic climate introduces nuances to the narrative.
Walmart navigates the evolving retail landscape with strategic foresight. Its robust e-commerce platform and rumoured Vizio acquisition solidify its digital presence. Additionally, forays into advertising and a 3-for-1 stock split demonstrate a multifaceted approach to growth beyond mere sales figures.
Despite fluctuating consumer spending, Walmart’s holiday sales rose 3.8%, showcasing its value proposition during inflationary times. Proactive expansion plans, including store openings and wage increases, underscore its commitment to growth and employee well-being.
Shares are up 8% year-to-date, outperforming the S&P 500. However, potential deflation poses a challenge. While it could impact top-line sales, it might also boost discretionary spending, offering a nuanced opportunity for Walmart’s strategic agility.
Technical Analysis:
Walmart’s 1-day chart depicts a share price trading flat, around $170 ahead of the company’s earnings report release. A bullish trend was confirmed with WMT trading above the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line) within an ascending channel. The recent 50-SMA crossing above the 100-SMA indicates short-term bullish momentum, supported by the upward-sloping RSI at 67.71 but nearing overbought territory.
Short-term trading opportunities towards the all-time high of $171.93 could arise should the company report positive results. A successful bridge of the initial resistance and positive outlook for the current financial year could trigger a run, with the resistances at $175.00 and $180.00 acting as the next significant levels higher.
However, potential downside risks exist. Disappointing earnings or cautious guidance could lead to a pullback towards the initial support at the 23.60% Fibonacci retracement level ($166.65). A break below this level, supported by significant volume, could open the door for further decline towards the 50% and 61.80% Fibonacci retracement levels of $160.74 and $158.09, respectively.
Summary
Walmart stands at a crossroads. Technically, the bulls hold the reins, with strong indicators suggesting potential upside. However, the upcoming earnings report and guidance hold the key to unlocking this potential. Investors need to navigate the balance between a likely strong quarter and a cautious management outlook. Significant resistance lies at $175.00 and $180.00, while downside support rests at $166.65, with further levels at $160.74 and $158.09.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters, CNBC, BNN, Benzinga.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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