The S&P 500 had a good week due to the impressive start of Q1 earnings and favorable inflation data. In March, the consumer price index rose 5%, lower than the previous month's 6%, and met economists' expectations.
Walmart earnings outlook
Information is not investment advice
Walmart is one of the biggest retail corporations in the US, with $244 billion in total assets. Does it worth buying amid rising prices and supply concerns that shatter the world economy? We decided to analyze Walmart ahead of the upcoming earnings report.
Walmart is in trouble
Walmart has performed well since the stock market crash in March 2020, gaining 55% over the last years. It may seem not much, but Walmart is a retail company that resists volatility. Average spending grew across 2020 and 2021, rising by 22% and then by an additional 2%. Store sales felt great, too, increasing by 6% through late 2021. Sounds great, but there is a serious concern about future earnings.
The E-commerce segment is likely to be a stumbling block this year as the recession comes to the world’s economy. Shops are moving away from digital spending as Covid-19 becomes a regular flu-like disease and people are no longer locked in their homes.
To fight back the market share, Walmart needs to increase its popularity among US citizens and decrease its dependence on digital shopping (or increase its quality). That will be a major challenge because Walmart’s closest rival – Target – is gaining speed due to better supply chains and pricing policies. That’s why Target is able to post lower revenues but higher profit margins. But Target has only 2000 stores against Walmart’s 11 000, so we have a more worthy opponent – Amazon.
Amazon surpassed Walmart’s market capitalization in 2015 and has been on the top since then. Walmart has a far worse digital segment and scalability. Can the company change the game and be a first?
Walmart earnings forecast
Probably, the miracle won’t happen, and Walmart will perform poorly in the earnings report. Not only the company fails to compete with its closest rivals, but other factors are pressing on it.
Walmart likely faced soaring costs in areas like transportation and wages. It has been hard to keep employee turnover low in this tight labor market. And the chain might be seeing a demand shift away from some high-margin products, like home furnishings and apparel, as consumers prioritize spending on essentials.
The chart signals the same. Did you know about the Wyckoff distribution model? It tells us about an upcoming recession in the asset. Please take a look at it.
And now look at Walmart’s chart. The chart and the model look almost the same. Thus, we expect Walmart to show worse than expected earnings results and go lower to the support area at $132-126.
Walmart daily chart
Resistance: 152.00, 161.00
Support: 144.00, 132.00, 126.00, 117.00
Walmart will release its earnings report on May 17, before the market opens. Analysts expect EPS of $1.46 and revenue of $138.12 billion.
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