Walmart Inc. (Ticker Symbol: WMT) released quarterly earnings and revenue that were better than the street was expecting. The retail giant reported an earnings per share beat of $1.27 cents per share vs. Wall Street analysts’ expectations of $1.22 cents per share. Walmart also reported a revenue beat of $130.38 billion vs. Wall Street analysts’ estimates of $130.11 billion. Additionally, the company released that same-store sales were up 2.8% vs. 2.1% that Wall Street was looking for. The company stated that the strong quarter was due to its strong domestic businesses, investments in online operations, and investments in its grocery business.
Walmart had a boost this quarter from Amazon’s Prime Day event in July, where Walmart offered similar discounted deals to compete with the e-commerce giant. Walmart stated that its e-commerce business has been gradually expanding and surged more than 37% for the quarter. The online business has been doing well, thanks to the growth in next-day delivery services. Currently, Walmart has more than 1,000 locations that offer same-day delivery for groceries. Additionally, Walmart has more than 2,500 locations that now offer in-store pickup for online grocery orders.
Above is the past two years of Walmart’s stock. Walmart’s stock took off to what seemed like a rough start to the year in 2018. The stock put in a v-shaped reversal and unfortunately for Walmart’s shareholders, the stock took a negative turn after a disappointing first-quarter earnings report. The stock proceeded to sell off over 25% from it’s 2018 highs and began to form a rounded bottom basing pattern over the course of the next two quarters. While doing so the stock also put in a bullish divergence, where the stock makes a lower low in price, but the Relative Strength Index makes a higher low, as seen on the chart with the purple lines. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, which occurred in Walmart’s case.
Walmart’s stock finally shot higher after a positive third-quarter earnings report where the company announced investing in its online business. The stock sold off hard into the fourth quarter of 2018 putting in its first oversold condition in its Relative Strength Index in over two years. Walmart started off 2019 by breaking through a short term downtrend. The stock found some price support at its 100-day Moving Average in the second quarter of this year. Walmart proceeded to rally, trading to an all-time high of $115.49 on July 16th of 2019.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 18 analysts offering 12-month price targets, the average price target for Walmart’s stock is $119.22. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $112.99.
Walmart is finally seeing the investments in its e-commerce business beginning to pay off. Long-term shareholders continue to be rewarded for holding Walmart’s stock, not only for its dividend, but for its capital appreciation as well. Investors in the space should look to Target’s (Ticker Symbol: TGT) earnings release on August 21st for fresh news within the sector.