Walmart pre-earnings alert: Don’t buy yet

As Walmart Inc. (NYSE:WMT) gears up to reveal its Q1 2025 earnings on May 16, 2024, investors are eagerly awaiting insights into the retail giant’s performance. Amidst a flurry of projections and expectations, analysts have painted a mixed picture for Walmart’s upcoming financials.

Forecasts suggest revenue of $158.0 billion, adjusted EBITDA of $9.56 billion, operating profit of $6.56 billion, and earnings per share (EPS) of $0.52. However, a cautious undertone emerges from downward revisions in EPS estimates, with 17 out of 23 analysts revising their EPS estimates downward in the last 90 days.

Analyst sentiment varies, with some, like Morgan Stanley’s Simeon Gutman, highlighting potential upside driven by Walmart’s outperformance in the grocery sector, while others urge a deeper dive into growth initiatives to gauge sustainability.

The broader economic landscape adds layers of complexity to the analysis, with Goldman Sachs signaling consumer strain and cautioning against companies reliant on low-income consumers. However, amidst this backdrop, Walmart emerges as one of the few stalwarts seemingly weathering the storm, leveraging its scale, diversified revenue streams, and margin optimization strategies to navigate challenging terrain.

But beyond the numbers and projections lies a crucial question for investors: Should one take the plunge into Walmart’s stock ahead of its earnings revelation? To answer that, let’s turn our attention to the charts to discern potential trends and signals.

On Walmart’s long-term chart, it becomes apparent that the stock has seen a steady bull run since lat-2015, which has taken it from sub $20 levels to above $60 where it trades currently. If an investor bought the company’s stock during this period and is still holding it, there’s little to no chance that they wouldn’t have made money.

WMT chart by TradingView

For such long-term investors, the crucial level to watch is $52, which has previously acted as a resistance for the stock in 2020 and 2022 but has now turned into a support. The stock briefly dipped below it late last year, making a low at $49.85, but immediately bounced back. As long as the stock keeps trading above $52, the long-term bull run will remain intact.

In the short term, ever since Walmart reported its Q4 results in February and the stock gapped up from $55 levels to $60, it has largely been trading in a range between $58.5 and $61.5. It has thrice tried to break above $61.5, but couldn’t.

WMT chart by TradingView

The short-term momentum indicators are currently in a neutral zone, which suggests neither bulls nor bears control the stock. For short-term traders who are bullish on the stock, it would be ideal to not initiate a position currently unless the stock crosses above $61.5 and closes there for a day. If Walmart’s stock manages to do that, they can buy it with a stop loss at $58.05 and a profit target of $67.8.

Traders who are bearish on the stock should also ideally wait for it to fall below $58.5 before initiating a short position. If the stock goes below that level, they can short it with a stop loss at $61.8 and a profit target of $52.4.

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