The Best Walmart Stock Could Be Set Up for Major Rally
Walmart Inc.The underperformance (WMT) in 2018 after a strong run last year is an opportunity to buy the shares at a discount, according to a bull on the street, which points to signals on its technical charts that indicate the retailer is positioned for a rebound. (See also: Health Insurance: new front on Walmart vs. Amazon?)
Instinet technical analyst Frank Cappelleri, speaking on CNBC’s” Trading Nation ” on Wednesday, was upbeat about the world’s largest retailer ahead of its first-quarter results on Thursday. “Walmart is at a tipping point,” said Cappelleri, who noted that WMT shares have suffered a four-month decline of nearly 20%. A drop of this magnitude has only happened twice in the last 10 years for Walmart, once in 2009 and again in 2015, the technical analyst said. “The positive thing is that this led to rebounds every time,” Cappelleri said. He added that “Walmart is now approaching a very interesting support line,” from $ 80 to 8 82, and “has been able to bounce there for the last week or, coincidentally, we are also close to a bullish support line, again close to that 2015 low … We like to have two areas of support together when we can instead of one. So, I think all those factors together could help Walmart bounce back.”
WMT decline: so bad, it’s good
Shares of the Bentonville, Arkansas-based discount department store and grocery chain have been “hammered” after the acquisition of Indian e-commerce firm Flipkart, BK Asset Management’s Boris Schlossberg said. Last week, the retail giant said it would pay $ 16 billion for a 77% stake in the online shopping platform. The managing director of FX strategy intervened at WMT, suggesting that investors will have to stay patient with the company’s long-term strategy. He indicated that investors “rightly” sold the shares as the mega-deal will be dilutive to earnings in the coming years given that the Asian e-commerce platform will “bleed money” during that time. He pointed to toro’s case for the acquisition, in which some suggest it’s a big game in the future, similar to when Alphabet Inc. (GOOGL), then Google, bought YouTube for “too much money.In the short term, however, Walmart will need to boost its brick-and-mortar business while waiting for a takeoff in digital, Schlossberg said, or risk pressure from investors who are unwilling to wait while investments pay off.
In Q1, WMT posted a 2.1% gain in same-store sales, with online sales growth of 33% compared to the same period last year. The results failed to provide a lift to the shares, as WMT closed up 1.9% on Thursday at JU 84.49, taking its year-to-date loss (YTD) to 14.4% and the 12-month return to 12.5%. For comparison, the S & P 500 rose 1.7% YTD and 15.4% for 12 months.