The Walmart stock price will be in the spotlight this week as the company publishes its quarterly results. The shares will also be watched closely after the firm advertised a cryptocurrencies lead position. It ended the week at $140, which was about 18% above the lowest level since March.
Walmart earnings ahead
Walmart, the giant retailer, will publish its quarterly results on Tuesday before the regular session. Analysts expect that the company’s revenue dropped to about $135 billion in the second quarter after rising by $137 billion in the first quarter. The firm made more than $136 billion in the same quarter last year.
Still, there is a possibility that Walmart will report a strong quarter. For one, data compiled by FactSet showed that more than 87% of all companies that have published results did better than estimated.
Additionally, Walmart has a long record of beating analysts’ estimates. It has done better than estimated in the past five consecutive quarters. Also, Amazon, its leading competitor, published stronger quarters, signaling that the retail sector did well during the quarter.
The Walmart stock price will move because of the headline numbers. Still, the key catalyst will be the firm’s forward guidance and the performance of its e-commerce operations. Analysts have always watched its digital operations to see how it is competing with Amazon.
Most importantly, Walmart stock will react to the company’s cost structure. This is after the firm boosted its spending to deal with the rising demand for its e-commerce solutions.
Is Walmart a buy or sell?
Fundamentally, Walmart is a strong company. For one, it has thousands of stores that are located close to most Americans. It also has a membership product that is similar to Amazon Prime. This plan helps it grow its digital sales while building a moat around its business.
Therefore, analysts expect that Walmart’s stock price will keep rising. Most of those who follow it have a buy or the hold rating, according to data compiled by Yahoo Finance. In a recent report, analysts at Stephens said that the stock would rise to $170 in the near term.
Those at Citigroup, Wells Fargo, Raymond James, Royal Bank of Canada (RBC), and Deutsche Bank expect that it will rise to more than $160.
Walmart also has a higher dividend yield than some of its peers. It has a trailing dividend yield of about 1.6%, which is higher than that of firms like Target and Costco. This yield is backed by a payout ratio of about 36%.
Further, a discounted free cash flow (DCF) valuation of the company shows that the stock is a bit undervalued. The calculation finds that its fair value is currently at about $184, which is 19% above the current level.
The multiples comparison also shows that the Walmart stock price is a bit undervalued. It has price-to-earnings (PE) and EV to EBITDA ratios of 34 and 11.74, respectively. The S&P 500 has an average PE of more than 45.
Walmart stock price analysis
The daily chart shows that the Walmart stock price has been in a strong bullish trend in the past few months. The shares are trading at $149, which is lower than the YTD high of $153. The bullish trend is also being supported by the 25-day and 50-day Exponential Moving Averages (EMA).
The stock is also significantly overbought, considering that the Relative Strength Index (RSI) has risen to 73. Therefore, there is a possibility that the stock will have a pullback ahead and after its earnings.