Will Amazon Surpass Walmart As The Largest Retailer? JPMorgan Thinks So

Amazon has experienced amazing growth over the past year, and JPMorgan Chase now believes it will surpass Walmart as the largest retailer in the United States.

Amazon’s 2020 growth makes it a Buy

One of the companies to experience huge growth during the pandemic is Amazon. The retail giant dominated the market thanks to its numerous delivery power. As such, JPMorgan now estimates that it would surpass Walmart to become the leading retailer in the United States by next year.

In its analysis of Amazon, JPMorgan analyst Doug Anmuth reiterated that Amazon is one of the leading picks. He told clients Amazon could cross a major milestone next year and surpass Walmart to become the top retailer in the United States. As such, he rated Amazon as a Buy, with the stock currently trading at $3,376 per share.

AMZN chart. Source: FXEMPIRE

JPMorgan said, “The dramatic growth of e-commerce over the past 18 months has accelerated Amazon’s rise to dominance, and even the largest traditional retailer may soon fall behind.”

The prediction came after a stellar 2020 for Amazon, where its e-commerce business helped it catch up to Walmart in the US retail game. In 2019, Amazon had a 6.8% share of US retail sales while Walmart had an 8.9%. However, Amazon’s share jumped to 9.2% last year while Walmart went ahead to 9.3%.

Amazon’s rally came due to the pandemic, causing huge demand for e-commerce services. As of 2020, Amazon had a 51.2% share of e-commerce sales in the United States, while Walmart only had 5.6%.

AMZN dips despite positive analysis

Amazon’s stock (AMZN) is performing poorly at Tuesday’s pre-market trading session despite the Buy recommendation from JPMorgan. At the time of this report, AMZN is trading at $3,369.43, down by 0.43% in the pre-market trading session.

WMT chart. Source: FXEMPIRE

Walmart’s stock (WMT) isn’t fairing any better in the market. WMT is down by 0.50% over the past few hours, and it is currently trading at $139.86 per share.

Year-to-date, Amazon is the better performer. AMZN began the year trading at $3,340 and has added roughly $30 since then. Meanwhile, WMT’s price has declined year-to-date, from $144 to $139.

Exclusive-Online Wholesale Marketplace Faire Raises $260 Million, Valued at $7 Billion

By Jane Lanhee Lee

Faire helps small retailers connect with small brands, helping them to compete with retail giants like Amazon or Walmart Inc, said Faire Chief Executive and co-founder Max Rhodes. He started the company as he experienced the challenges of finding sales channels for an upscale New Zealand umbrella brand he was trying to sell in the United States.

“We were flying all over the country, going to trade shows. We were emailing back and forth with retailers. Email was kind of the height of the technological innovation for us in that business,” said Rhodes.

There are an increasing number of tech companies that are helping small and medium-sized businesses grow online, offering shipping, payment, e-commerce platforms and marketing services, and making it possible to sell outside of the Amazon marketplace.

One of Faire’s most popular filters to add in merchandise searches is the “not on Amazon,” said Rhodes. He said the average retailer or brand on Faire’s platform has about $250,000 in annual sales, but some are also growing big, fast.

Following its success in the U.S. market, Faire expanded into Europe three months ago and is seeing fast growth there, said Rhodes.

The funding round was led by Sequoia Capital, one of Silicon Valley’s top venture capital firms.

“We’re still in the single-digit online penetration for the wholesale market,” said Sequoia partner Ravi Gupta. “We’re in the very early innings of what we think is a multi-decade-long trend towards digitization on some of these things.”

(Reporting by Jane Lanhee Lee; editing by Jonathan Oatis)

Costco Losing Altitude Despite Strong Quarter

Costco Wholesale Corp. (COST) sold off more than 2% on Friday despite beating Q3 2021 top and bottom line estimates by healthy margins. The big box retailer earned $2.75-per-share during the quarter, $0.47 better than expectations, while revenue rose a healthy 21.8% year-over-year to $44.38 billion, more than $500 million higher than consensus. U.S. sales rose 15.2% while e-commerce sales eased off the torrid 2020 pace, rising a still-impressive 38.2%.

Weak Buying Interest

The stock is finally trading in the green for 2021 following a steep first quarter decline that shed nearly 20%. A broad-based rotation out of the COVID-19 beneficiaries and into recovery plays dampened buying interest after last year’s impressive 29% return and it’s been slow to return.  Even so, Costco was trading at a 35.5 forward price-to-earnings (P/E) ratio before the report, marking a premium to rivals Walmart Corp. (WMT) and Target Corp. (TGT).

Telsey Advisory Group analyst Joseph Feldman raised his target to $415 on Friday, noting “Costco should remain a share gainer, with its solid sales, high membership renewal rates (110MM total members), and square footage growth of LSD. In FY22, Costco should continue to generate solid EPS growth, driven by a MSD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs. We maintain our Outperform rating.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after last year’s strong performance, underpinned by 19 ‘Buy’, 4 ‘Overweight’, 10 ‘Hold’, and 2 ‘Underweight’ recommendations. Price targets currently range from a low of $249 to a Street-high $415 while the stock closed Friday’s session more than $35 below the median $416 target. This low placement highlights Main Street discomfort with the higher-than-historical valuation.

Costco has been a superior performer for more than a decade, posting a long series of new highs. It broke out above February 2020 resistance at 325 in July and entered a healthy uptrend that posted an all-time high at 393.15 in November. The subsequent decline found support at 307 in March while a V-shaped recovery into May stalled four points below the 2020 peak. Weak accumulation during the uptick has failed to reach prior highs, setting the stage for mixed two-sided price action into the second half.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Walmart Shares Climb on Q1 Earnings Beat and Raised Outlook; Target Price $180 in Best Case

Walmart shares rose as much as 4% on Tuesday after the Bentonville, Arkansas-based retailer reported better-than-expected earnings and revenue in the first quarter and lifted its full-year guidance.

The multinational retail corporation that operates a chain of hypermarkets said its operating income jumped over 30% to $6.91 billion and adjusted earnings rose 43% to $1.69 per share, beating the Wall Street consensus estimates of $1.21 per share.

The world’s largest retailer said its total revenue rose about 3% to $138.3 billion, above the analysts’ expectations of $131.97 billion.

The retail giant forecasts fiscal 2022 earnings to increase by high single digits, an upgrade from the previous forecast for a slight decline in profit.

“We anticipate continued pent-up demand throughout 2021,” said Doug McMillon, President and CEO at Walmart.

Following the upbeat results, Walmart stock rose as much as 4.09% to $144.58 on Tuesday.

Analyst Comments

“Solid Q1 beat against mixed/negative sentiment bodes well for the stock. Higher F’22 outlook mostly on Q1 beat keeps expectations in check. Good cost management implied for the remainder of F‘22,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“These results and guidance raise are a positive for the stock in our view. The full-year EPS outlook was raised by approximately 6-10%, which sets the stock up to grind back to its 2020 highs assuming the multiple holds.”

Walmart Stock Price Forecast

Nineteen analysts who offered stock ratings for Walmart in the last three months forecast the average price in 12 months of $165.19 with a high forecast of $180.00 and a low forecast of $141.00.

The average price target represents a 16.40% increase from the last price of $141.91. Of those 19 analysts, 16 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price to $160 from $154 with a high of $250 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Overweight” rating on the multinational retail corporation’s stock.

Several other analysts have also updated their stock outlook on Tuesday. Raymond James raised the stock price forecast to $165 from $155. JP Morgan upped the target price to $157 from $148. Telsey Advisory Group lifted the price objective to $170 from $162.

“Despite increasingly difficult comparisons, wide-moat Walmart saw strong fiscal 2022 first-quarter performance, with 3% revenue expansion spurred by growth in all channels and rising general merchandise sales. This should lead us to lift our near-term targets and our $124 fair value estimate by a mid-single-digit percentage,” noted Zain Akbari, equity analyst at Morningstar.

“We attribute the results to transitory pandemic-related volatility and still expect low-single-digit sales growth and 4%-5% adjusted operating margins long-term. We suggest investors await a more attractive entry point, considering near-term volatility and intensifying competition.”

Check out FX Empire’s earnings calendar

Walmart Struggling With Wage Inflation

Dow component Walmart Inc. (WMT) reports Q1 2022 earnings ahead of Tuesday’s opening bell, with analysts looking for a profit of $1.21 per-share on a staggering $131.5 billion in revenue. If met, earnings-per-share (EPS) will mark a slight profit increase compared to the same quarter last year. The stock fell nearly 13% in just two weeks after missing Q4 2021 estimates in February and providing weak fiscal year 2022 guidance.

Profits Impacted by Rising Wages

The retail giant has struggled since hitting an all-time high above 150 in December, held down by an exodus out of COVID-19 beneficiaries. Shrinking profit margins have now lifted to the top of investor concerns, with the company shifting more workers to full time employment while raising average hourly wages to over $15 per hour. However, that still doesn’t measure up with competitors Amazon.com Inc. (AMZN) and Target Corp. (TGT), raising odds for further wage pressure.

Recent reports also warn that Walmart is having trouble competing in the highly-lucrative grocery space, struggling to hold onto the top sales slot. According to Vox’s Recode, grocery sales are “losing market share rapidly”, which isn’t surprising because multiple competitors introduced curbside pickup services in 2020 to address the COVID-19 pandemic and have kept those initiatives in place due to their immense popularity.

Wall Street and Technical Outlook

Wall Street consensus remains modestly bullish, with an ‘Overweight’ rating based upon 21 ‘Buy’, 6 ‘Overweight’, 5 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $120 to a Street-high $180 while the stock closed Friday’s session more than $20 below the median $160 target. This week’s report isn’t likely to change analyst sentiment, given growing inflationary pressure that could weigh on fiscal year results.

Walmart cleared 2000 resistance in the 60s in 2017 and entered an uptrend that carved a series of higher highs and higher lows into December’s all-time high at 153.66. The stock sold off to the 200-day moving average in March and bounced into the second quarter but is still trading in the lower half of the range established by that downdraft.  Accumulation has dropped to 2019 levels at the same time, raising odds for mixed price action into the second half of 2021.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch Next Week: Home Depot, Walmart, Target and Deere in Focus

Earnings Calendar For The Week Of May 17

Monday (May 17)

Ticker Company EPS Forecast
DM Dominion Midstream Partners -$0.10
RYAAY Ryanair -$2.04

Tuesday (May 18)

IN THE SPOTLIGHT: HOME DEPOT, WALMART

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its first-quarter earnings of $3.06 per share, which represents year-over-year growth of about 47% from $2.08 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of 21% to $34.2 billion. In the last four quarters, on average, Home Depot has beaten earnings estimates about 2%.

The Atlanta, Georgia-based company’s shares rose over 20% so far this year. Home Depot’s better-than-expected results, which will be announced on Tuesday, could help the stock hit new all-time highs. But the stock’s performance could hinge on margins.

“We expect a 25% to 30% Q1’21 comp as top-line strength likely continued through the quarter. We model gross margin down 40 bps. For context, in Q4 lumber inflation pulled gross margin down ~30 bps and likely worsened sequentially. On SG&A, assuming the per sq ft 2-year stack holds from Q4 (+24%), SG&A should lever 360 to 400 bps,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“In our model, this combination produces EPS of $3.55 to $3.85 vs consensus at $2.95. While a ’21 guide was not provided, if the ’20 top-line exit rate held through ’21, HD would expect a flat to slightly positive comp and an EBIT margin of at least 14%.”

WALMART: The Bentonville, Arkansas-based retailer is expected to report its first-quarter earnings of $1.21 per share, which represents year-over-year growth of about 47% from $1.18 per share seen in the same period a year ago.

However, the multinational retail corporation that operates a chain of hypermarkets’ revenue would decline about 2% to $131.8 billion. In the last four quarters, on average, the retail giant has beaten earnings estimates about 9%.

“We raise 1Q22 EPS estimate to $1.23 from $1.22, on stronger Walmart U.S. comps, more modest SG&A deleverage, offsetting lower International segment revenues on divestitures, and remain above Street’s $1.21. We raise our Walmart U.S. comps to +0.5%, ahead of Street’s +0.3%, and our updated estimates now imply 2-year stack growth of +10.5% Y/Y, in-line with 4Q21,” noted Oliver Chen, equity analyst at Cowen.

“We expect a tailwind from stimulus, and improved apparel and other general merchandise categories, offset by grocery and other essential categories normalizing. Recall in 1Q21 Grocery improved +LDD, Health & Wellness +HSD, and General Merchandise +MSD.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 18

Ticker Company EPS Forecast
HD Home Depot $3.06
WMT Walmart $1.21
SE Spectra Energy -$0.45
NTES NetEase $6.35
BZUN Buzzi Unicem RSP $0.60
M Macy’s -$0.39
DQ Daqo New Energy $1.18
BIDU Baidu $10.63
KC Kutcho Copper -$0.16
STE Steris $1.79
TTWO Take Two Interactive Software $0.68
TCOM Trip.com Group Ltd -$2.05
JHX James Hardie Industries $0.29
TTM Tata Motors $0.47
MBT Mobile TeleSystems OJSC $19.37
AAP Advance Auto Parts $3.08
DY Dycom Industries $0.13
ASND Ascendant Resources -$2.06

Wednesday (May 19)

IN THE SPOTLIGHT: TARGET CORP

Target, one of the largest North American retailers offering customers both everyday essentials and fashionables, is expected to report its first-quarter earnings of $2.16 per share, which represents year-over-year growth of over 266% from $0.59 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 60%. The Minneapolis, Minnesota-based company would post year-over-year revenue growth of over 9% to $21.51 billion.

Target’s better-than-expected results, which will be announced on May 19, would help the stock hit new all-time highs. Target shares rose over 19% so far this year.

“We raise 1Q21 EPS to $2.18E, ahead of Street’s $2.10 as we raise our comps estimate to+11.5%, and tweak margin assumptions. We now model comps +11.5%, yielding 2-year stack growth of +22.3%, accelerating sequentially by +30bps,” noted Oliver Chen, equity analyst at Cowen.

“We are ahead of Street’s+8.2% consensus estimate, and think our estimates could ultimately prove conservative as Target’s (TGT) category portfolio should see the retailer benefit from the stimulus, improving trends in apparel and other re-opening categories, along with continued strength in-home, which will more than offset normalizing food, essentials, and other category comps.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 19

Ticker Company EPS Forecast
VIPS Vipshop $2.19
JD JD.com $2.29
LOW Lowe’s Companies $2.59
CAE Cae USA $0.16
ADI Analog Devices $1.45
TGT Target $2.16
TJX TJX Companies $0.30
EXP Eagle Materials $1.23
RXN Rexnord $0.45
KEYS Keysight Technologies $1.33
CSCO Cisco Systems $0.82
LB L Brands $1.15
SNPS Synopsys $1.53
SQM Sociedad Quimica Y Minera De Chile $0.25
YY YY -$0.39
CPRT Copart $0.80
OMVJF OMV $0.97

Thursday (May 20)

Ticker Company EPS Forecast
MNRO Monro Muffler Brake $0.29
KSS Kohl’s $0.06
BRC Brady $0.65
RL Ralph Lauren -$0.75
HRL Hormel Foods $0.41
BJ BJs Wholesale Club Holdings Inc $0.56
PANW Palo Alto Networks $1.28
ROST Ross Stores $0.88
FLO Flowers Foods $0.40
AMAT Applied Materials $1.51
DECK Deckers Outdoor $0.67
TCEHY Tencent $0.54
TBLMY Tiger Brands Ltd PK $0.34

Friday (May 21)

IN THE SPOTLIGHT: DEERE & COMPANY

Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal second-quarter earnings of $4.49 per share, which represents year-over-year growth of over 112% from $2.11 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the agricultural, construction, and forestry equipment manufacturer has delivered an earnings surprise of over 60%. The Moline, Illinois-based company would post year-over-year revenue growth of over 28% to $10.5 billion.

Deere’s better-than-expected results, which will be announced on Friday, would help the stock hit new all-time highs. Deere shares rose over 42% so far this year.

Deere & Company (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given an historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” noted Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 21

Ticker Company EPS Forecast
ROLL Rbc Bearings $1.05
DE Deere & Company $4.49
BKE Buckle $0.29
BAH Booz Allen Hamilton $0.84
VFC VF $0.28
FL Foot Locker $1.06

Costco Testing Key Resistance Level

Costco Wholesale Corp. (COST) is pressing against a key resistance level in Monday’s pre-market in reaction to bullish analyst commentary. The stock is still in the red for 2021 after posting a 28% return in 2020, underpinned by its commanding retail position during the COVID-19 pandemic. Taken together with 2019’s 36% return, the underperformance isn’t usual, given the market’s classic warning that “the big the move, the broader the base”.

Post-Pandemic Economic Surge

Big box store sentiment has deteriorated this year, with rival Walmart Inc. (WMT) also posting a negative year-to-date return. Despite investor reluctance, Costco is perfectly positioned to benefit from the post-pandemic economic surge in the United States and other parts of the world, given its massive footprint in North America, Asia, Australia, and Europe. It’s also trading close enough to the 2020 high to potentially support an advance toward the 500 level.

Telsey Advisory Group analyst Joseph Feldman raised his target to $375 on Monday, noting “Costco should remain a share gainer, with its solid sales, high membership renewal rates, and square footage growth of LSD. Costco should continue to generate solid EPS growth, driven by a MSD-DD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs. We maintain our ‘Outperform’ rating, applying a P/E multiple of ~35x to our new FY22 EPS estimate of $11.15.”

Wall Street and Technical Outlook

Wall Street consensus also stands at an ‘Overweight’ rating, based upon 19 ‘Buy’, 4 ‘Overweight’, and 10 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $325 to a Street-high $415 while the stock is set to open Monday’s session more than $25 below the median $400 target. The Q3 2021 earnings report on May 27 could lift these targets.

Costco rallied above the February 2020 high at 325 in July and took off in a strong uptrend that posted an all-time high at 393.15 in November. It sold off more than 80 points into March and bounced strongly, grinding out a straight line recovery that stalled at the .786 Fibonacci retracement level at 375 about two weeks ago. A rally above this harmonic barrier should support a rapid advance into the 2021 peak near 400, setting off a potential breakout attempt.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Walmart Shares Slump as Full-Year Sales Forecasts, Q4 Profit Disappoints

Bentonville, Arkansas-based retailer Walmart reported better-than-expected revenue in the fourth quarter but surprised traders with a rare profit miss and said it expects full-year sales and earnings to decline primarily due to the impact of anticipated divestitures.

Following this disappointing result, Walmart‘s shares, which surged more than 20% last year, slumped over 6% to $138.03 on Thursday.

The multinational retail corporation that operates a chain of hypermarkets said total revenue jumped 7.3% to record $152.1 billion in the quarter ended January 31, 2021 and during the fiscal 2021 year it surged 6.7% to $559.2 billion.

The closely watched same-store sales rose 8.6% in the U.S., beating the Wall Street consensus estimates of 5.6%. That was largely driven by online sales, which grew 69% due to the COVID-19 pandemic.

Walmart’s (WMT) comps were better than expected including an 8.6% increase in the WMT U.S. business, ahead of consensus of 5.6% and an acceleration from 6.4% last quarter. Gross margins were up 29bp, in line with estimates and off just a bit from 50bp last quarter,” said Michael Baker, MD and senior research analyst at D.A. Davison & Company.

“But this strength is being overshadowed by higher expenses, including deleverage in the international and Sam’s businesses. This led to EPS of $1.39 or $1.46 adding back a $0.07 tax issue. This is in line with our estimate of $1.45 but below consensus of $1.51. We would buy the associated pressure in the stock today.”

The retail giant said its operating income surged more than 3% to $5.49 billion. On the other hand, adjusted earnings came in at $1.39 per share, missing analysts’ expectations of $1.51 per share.

The world’s largest retailer forecast adjusted net sales to grow low single-digits with operating income and EPS expected to be flat to up slightly.

“Guidance was muted, locking in gains from FY21 but stalling profit expansion in favour of critical investments in people (avg wage to >$15) and platform (capex +33% vs. prior levels). We’re specifically looking to test the degree of conservatism in guidance as new streams of value take hold and COVID-19 costs should moderate,” noted Stephanie Wissink, equity analyst at Jefferies.

Walmart Stock Price Forecast

Eleven analysts who offered stock ratings for Walmart in the last three months forecast the average price in 12 months of $161.33 with a high forecast of $177.00 and a low forecast of $131.00.

The average price target represents a 16.22% increase from the last price of $138.82. From those 11 analysts, nine rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $156 with a high of $240 under a bull scenario and $95 under the worst-case scenario. The firm gave an “Overweight” rating on the multinational retail corporation’s stock.

Several other analysts have also updated their stock outlook. Oppenheimer lowered the price target to $162 from $165. JP Morgan cut the price target to $157 from $160. Deutsche Bank raised the target price to $170 from $168. Credit Suisse Group gave a target price of $161 and rated “buy”.

Moreover, Royal Bank of Canada set a $170.00 price objective and gave the company a “buy” rating. DA Davidson lifted their price objective to $177 from $154 and gave the company a “buy” rating. Smith Barney Citigroup lifted their price objective to $172 from $155. Jefferies Financial Group lifted their price objective to $170 from $165 and gave the company a “buy” rating.

Analyst Comments

“Q4’21 EPS light. F’22 underlying growth guidance seems fine, but absolute F’22 EPS lower than expected. Investments picking back up mean the stock could tread water in the N-T,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We expect WMT to sustain recent momentum in its core business in F’21/F’22 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $156 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers in the current COVID-19 environment.”

Upside and Downside Risks

Risks to Upside: 1) Comps accelerate to +MSD-HSD led by continued Grocery strength. 2) Sustainable US e-comm growth of 50-60%+ behind Click & Collect momentum. 3) PhonePe gains wider market appreciation, driving incremental multiple expansion. 4) Walmart+ gains more traction than expected – highlighted by Morgan Stanley.

Risks to Downside: 1) E-commerce loses begin to rise again after briefly moderating. 2) US e-comm growth slows to <30% (comps <2%). 3) Greater than expected Flipkart losses.

Check out FX Empire’s earnings calendar

U.S. Market Wrap and Forecast for Thursday

Major benchmarks sold off overnight and gapped down at the start of Wednesday’s U.S. session. The reversal confirmed channel resistance above 3,900 on the SP-500 index. Selling pressure felt technical in nature rather than a change in sentiment, with parties unknown shifting toward more risk-adverse instruments. The WTI crude oil contract ended regular hours above 61, driven higher by the Texas freeze, while gold rolled over and silver bounced higher.

Bonds Bounce at Lows

January Retail Sales surged more than 5%, much better than 0.8% estimates, catching Wall Street analysts off-guard. $600 per person stimulus checks and debit cards were distributed before Trump left office, which citizens promptly used to buy furniture, electronic goods, appliances, and home furnishings. It’s surprising that economists failed to account for this capital in computing estimates because we’ve been taught they’re infallible.

Producer Price Index (PPI) did exactly what was expected, surging 1.3%, which marked the biggest monthly gain since at least 2009. Bonds bounced at lows after the news in a contrary reaction, suggesting that yields have stretched too far too soon. In any case, inflation has finally turned the corner, suggesting that market participants with less than 20 years of experience read up on prior economic cycles. Google ‘Paul Volcker’ for a quick tutorial.

Heading Into Friday Expiration

Dow component Walmart Inc. (WMT) reports Q4 quarter earnings in Thursday’s pre-market, with analysts expecting a profit of $1.51 per-share on a $147.0 billion in revenue. Wednesday’s retail sales report alters the playing field, perhaps ending a slow drip of selling pressure that’s drained shareholders since late 2020.  The stock is unlikely to break out soon but the news could attract buying interest, especially if they exceed expectations.

A dysfunctional options expiration tape makes sense at the end of a contract in which novice traders fueled the biggest short squeeze in several decades. Outstanding positions need squaring into Friday’s finale, explaining why SP-500 Volatility Index is getting jumpy. Even so, the longer-term mantra remains the same, with another round of stimulus and dovish Fed policy blowing up the biggest bubble since the late 1990s.

For a look at all of today’s economic events, check out our economic calendar.

How May Walmart’s Fiscal Q4 Earnings Affect its Share Price?

In the lead up to the earnings announcement, Walmart’s share prices have breached the resistance that had been offered by its 50-day simple moving average (SMA). Walmart’s share prices must climb back above its January high of $149.77 in order to send a strong message to markets that it can arrest its downward trend from the past couple of months.

With its 50-SMA is now threatening to cross below its 100-day counterpart, this stock is in need of a positive catalyst to prevent a significant widening of the 4.67% gap from its highest-ever closing price of $152.79 which was registered on 30 November.

What are analysts expecting for Walmart’s Q4 results?

  • For the three months ending 31 January, markets are expecting a 4.7% year-on-year growth to Walmart’s top line, even as quarterly revenue moves closer to that psychologically-important $150 billion mark.
  • Its earnings per share (EPS) for the period is slated to come in at $1.50, which would mark an 8.3% increase compared to the fourth quarter of its 2020 fiscal year.
  • Same-store sales in the US may have increased by 5%, which is about half of the growth seen in its fiscal first quarter (February-April), as the pandemic tailwinds taper off.

A digital focus amid the pandemic

Walmart’s e-commerce sales are expected to have surged by 66%, as the retail behemoth focuses on its omnichannel push. With the pandemic having driven consumers to purchasing their groceries online, coupled with shoppers being more budget-conscious amid the economic uncertainty, that should serve as a major boost to its digital revenue streams.

That should help propel Walmart’s net income for its entire 2021 fiscal year to a record high of $17.9 billion for the 12 months ending 31 January.

How do Walmart stocks tend to react on earnings day?

Market participants are already pricing in a single-day absolute move of 4.06% for Thursday. Over the past decade, the stock has averaged a 3.08% absolute move (either upwards or downwards) on earnings day.

However, note that Walmart’s stock has fallen after 4 out of the past 5 earnings announcements, suggesting that shareholders tend to indulge in some profit-taking on the day.

What other key factors/events are moving Walmart’s share price?

  • The sale of TikTok’s US operations appears to have hit a snag, after the Biden administration said that the deal is still being reviewed. The plan was for a group which includes Walmart to make the acquisition, allowing the mega retailer to leverage on TikTok’s user base and boost Walmart’s digital reach to consumers (imagine buying groceries via social media). Should this plan be officially declared dead, that could prompt the unwinding of some of Walmart’s gains, as markets dampen their optimism surrounding the retailer’s social-media synergies.
  • The Department of Justice’s lawsuit against Walmart regarding alleged opioid violations may result in a financial settlement totalling hundreds of millions of dollars, even though the DOJ is seeking civil penalties in the billions. For context, back in December, the US government accused Walmart of contributing to the opioid crisis by unlawfully dispensing and distributing prescription opioids via Walmart’s 5000 in-store pharmacies. This nationwide lawsuit comes on top of the more than 2,000 suits brought by states, cities, and counties that are contending with the fallout of the opioid crisis. The risk of such a financial hit may dampen the stock’s upside, even as observers await the trial’s commencement, which is slated for October 2021.

Although the conclusion to either the TikTok acquisition or DOJ lawsuit appears far off at this juncture, it could still cast a cloud over Walmart’s share prices in the interim.

Walmart bulls are likely to focus on the company’s fundamentals, especially its push into the digital and fintech realms, in order to keep the stock’s uptrend intact.

Written on 17/02/2021 07:30 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


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U.S. Market Wrap and Forecast for Wednesday

U.S. equity markets opened higher on the first day of options expiration week and promptly sold off, dropping SP-500 index back into a rising channel in place since November. Bonds lost ground as well, lifting the 30-year yield to the highest high since March 2020. The 10-year Treasury note pushed against 1.3% at the same time, signaling greater conviction about rising inflation as the stimulus bill works its way through Congress.

Banks Lift into Leadership

Credit card delinquencies held firm at elevated levels in January, reflecting continued stress as a result of high unemployment. However, the United States is rapidly turning the corner on the pandemic, with crashing positives set to translate into reopened restaurants and rehired workers. Dow component JP Morgan Chase and Co (JPM) posted an all-time high, lifting above 2018 resistance. Bank sector funds look solid as a rock at 2½ year highs and could easily break out in coming weeks, benefiting from a perfect storm of financial tailwinds.

The SP-500 index is closing in on the 4,000 level, just 16 months after trading above 3,000 for the first time. It took five years to go from 2,000 to 3,000 and 17 years to make the jump from 1,000 to 2,000. Market players who love two-sided price action have been left behind by this relentless uptrend, which will end as soon as the last bear capitulates. However, it’s anyone’s guess when that will happen.

Looking Ahead to Mid-Week

Walmart Inc. (WMT) and hotel chains lead a light reporting calendar during this holiday-shortened week. Marriott International Inc. (MAR) revenue fell 57% in the quarter ending in September and the run-up into year’s end could look even worse, given international lockdowns and quarantines.  MAR and rivals are trading close to 52-week highs despite obvious headwinds but bullishness may be misplaced, given pressure on business travel in the next few years.

Wednesday retail sales are expected to show a minor uptick after better-than-expected holiday sales. Market players will also examine the Fed Minutes for clues about interest rates but Chairman Powell has done a good job telegraphing the central bank’s intention to keep rates low. Taken together with dovish comments by Treasury Secretary Janet Yellen, there’s little reason to suspect that anyone in government will be tapping on the brakes in 2021.

For a look at all of this week’s economic events, check out our economic calendar.

Three Top Earnings Plays This Week

Monthly options expire at the end of this holiday-shortened trading week, hopefully generating much-needed volatility after a long string of low volume narrow range sessions. Major benchmarks are nearing overbought technical readings last hit in February 2020, just before all hell broke loose as a result of the pandemic. While it isn’t wise to expect a repeat any time soon, broad-based complacency has generated ideal conditions for a major shakeout.

Dow component Walmart Inc. (WMT) is the only U.S mega-cap on this week’s top earnings list, followed by China’s Baidu Inc. (BIDU) and Canada’s Shopify Inc. (SHOP). In case you hadn’t heard, the much smaller SHOP has been an absolute monster, rising 365% since the last trading day of 2019.  Three major hotel chains also step to the plate, telling us how many folks gave up overnight travel when the second wave erupted in October.

Shopify

Shopify is expected to report a Q4 2020 profit of $1.21 per-share on $913.3 million in revenue. The e-commerce juggernaut has been grinding through a ferocious uptrend since coming public at 16 in 2015 and is now trading just shy of the $1,500 level. However, the stock has gained a phenomenal 34% in just the last two weeks, setting off all sorts of overbought signals that raise odds for an aggressive ‘sell-the-news’ reaction, especially during options expiration.

Walmart

Wall Street analysts are looking for Walmart to post a Q4 2020 profit of $1.51 per-share on $147.1 billion in revenue, better than the $1.38 earned in the same quarter last year.  The stock posted a respectable 21% return in 2020 but all those gains were booked between March and the end of August. Shareholders have pulled up stakes and walked away since that time, rotating their profits into COVID-19 recovery plays.

Baidu

Baidu should report Q4 2020 earnings of $16.73 per-share on $30.1 billion in revenue, much worse than last year’s $26.54 per-share. However, the stock just broke out to an all-time high, underpinned by the formation of an intelligent electric vehicle company that’s forced Wall Street to reprice the search provider at a higher multiple, in line with other manufacturers. Look for traders to jump on any updates regarding that initiative.

For a look at this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Earnings to Watch Next Week: Advance Auto Parts, Baidu, Walmart and Magna in Focus

Earnings Calendar For The Week Of February 15

Monday (February 15)

IN THE SPOTLIGHT: LIBERTY GLOBAL

Liberty Global, the largest international broadband communications provider, is expected is report a profit of $0.25 per share in the fourth quarter, which represents year-over-year growth of over 110% from the same quarter last year when the company reported loss of $1.98 per share.

The Anglo-Dutch-American multinational telecommunications company is expected to post report a rise in revenue to $3.28 billion, up from $2.98 billion seen in the same period a year ago.

Liberty offers a complex proposition, but it has also a good story ahead if it’s able to replicate its Dutch merger success (combination of Ziggo & Vodafone) in the UK and Swiss transactions. From here we see two key value drivers: (1) the delivery on deal synergies, and (2) Liberty‘s ability to renew with growth. Meanwhile, 2021 is a transition/integration year,” noted Nawar Cristini, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 15

Ticker Company EPS Forecast
SCI Service International $0.88
LBTYA Liberty Global Class A Ordinary Shares $0.25
RIG Transocean -$0.16
DM Dominion Midstream Partners -$0.06
ICAD Icade €2.33
MELI MercadoLibre $0.08
OSH Oak Street Health -$0.23
YALA Yalla $0.12
OMAB Grupo Aeroportuario Del Centro Nort $7.07
LBTYK LIBERTY GLOBAL $0.25

 

Tuesday (February 16)

IN THE SPOTLIGHT: ADVANCE AUTO PARTS, ROYAL CARIBBEAN CRUISES

ADVANCE AUTO PARTS: The leading automotive aftermarket parts retailer is expected is report a profit of $1.97 per share in the fourth quarter, which represents year-over-year growth of over 20% from the same quarter last year when the company reported profit of $1.64 per share.

The company will report a rise in revenue to $2.36 billion from $2.11 billion seen in the same period a year ago.

“Conditions seem supportive for Advance Auto Parts (AAP) to deliver more meaningful margin expansion in 2021 and beyond. Expect in-line Q4 results; the April Virtual Strategy Update represents a more important potential catalyst. We are Overweight as risk/reward screens favourable,” said Simeon Gutman, equity analyst at Morgan Stanley.

AAP operates in a defensive (recession-resistant) category and has one of the largest long-term EBIT margin expansion opportunities in our coverage (we estimate 300-400 bps over time). COVID-19 slowed parts of AAP‘s transformation but gross and EBIT margin upside from internal initiatives is still expected beginning in 2021. Significant and improving FCF generation plus share repurchases likely to enhance EPS growth. We think the combination of a defensive category, AAP‘s progress generating stable top-line growth, and significant margin upside all make for a positive risk/reward skew.”

ROYAL CARIBBEAN CRUISES: The company which operates over 50 cruise ships on a selection of worldwide itineraries that call on more than 1,000 destinations is expected to report a loss of $5.20 in the fourth quarter, which represents a year-over-year decline of over 450% from the same quarter last year when the company reported a profit of $1.42 per share.

The Miami-based company will report revenue of $35.616 million, down over 98% from $ 2.52 billion seen in the same period a year ago.

“We think the cruise industry will be one of the slowest sub-sectors to recover from COVID-19. Cruising needs not just international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence. We expect cruising to resume in Q2 2021, and expect FY19 EBITDA to return in FY23 given FY22 will be the first normal year, and pricing will likely come under pressure. FY19 EBITDA implies EPS 40% lower given share issue dilution and higher interest expense,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 6x even in FY23e, so we see a risk more equity might need to be raised.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 16

Ticker Company EPS Forecast
OMC Omnicom $1.66
AN AutoNation $2.03
RCL Royal Caribbean Cruises -$5.20
ES Eversource Energy $0.85
LPX Louisiana Pacific $1.70
BRKR Bruker $0.55
TRU TransUnion $0.79
BKI Black Iron Inc. $0.56
ALLE Allegion $1.18
IAA IAA Inc $0.44
SABR Sabre -$0.66
FELE Franklin Electric $0.52
CVS CVS Health $1.24
AAP Advance Auto Parts $1.97
ZTS Zoetis $0.86
ECL Ecolab $1.26
IPGP IPG Photonics $0.98
VMC Vulcan Materials $0.99
GNW Genworth Financial $0.20
EXAS Exact Sciences -$0.22
FQVLF First Quantum Minera $0.11
CAR Avis Budget -$0.60
ENLC EnLink Midstream $0.02
CMP Compass Minerals International $1.40
ACC American Campus Communities $0.09
TNET TriNet $0.26
QTS QTS Realty $0.02
CSOD Cornerstone OnDemand $0.27
KAR Kar Auction Services $0.29
IOSP Innospec $0.77
RPAI Retail Properties Of America $0.01
OXY Occidental Petroleum -$0.58
DVN Devon Energy $0.03
DIOD Diodes $0.70
A Agilent $0.90
SEDG Solaredge Technologies Inc $0.66
AIG AIG $0.93
RNG RingCentral $0.27
BYD Boyd Gaming $0.39
LSCC Lattice Semiconductor $0.17
HE Hawaiian Electric Industries $0.34
MCY Mercury General $0.69
CLR Continental Resources -$0.08
VERX Vertex Inc. Cl A $0.07
TX Ternium $1.15
SGMS Scientific Games -$0.39
EXPD Expeditors International Of Washington $1.07
AMED Amedisys $1.45
MDT Medtronic $1.15
AWK American Water Works $0.80
BLUE Bluebird Bio -$3.01
WLK Westlake Chemical $0.68

 

Wednesday (February 17)

IN THE SPOTLIGHT: BIDU

Baidu.com Inc, a leader in the Chinese search industry in terms of user market share to report $2.51 earnings per share (EPS) for the current fiscal quarter, which represents a year-over-year decline of over 30% from the same quarter last year when the company reported a profit of $3.81 per share.

The Chinese tech giant will post sales of $4.46 billion for the current fiscal quarter, up over 7% from $4.15 billion during the same quarter last year.

“Following a sharp recent rally, we maintain our EW rating on an industry-relative basis. Baidu has provided better disclosure and has struck a constructive tone on its AI initiatives. We find it well-positioned in certain industrial applications. We also like its rich cash position and strategic investments,” wrote Gary Yu, equity analyst at Morgan Stanley.

“Our price target reflects materialization of AI investments, but we highlight milder near-term growth vs. peers amid risks from competition. The company is well-positioned to ride the next Internet wave, but patience is needed. Our price target implies 18x consensus 2021e non-GAAP P/E the vs. historical 11-24x trading band since 2019.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 17

Ticker Company EPS Forecast
RPRX Repros Therapeutics $0.71
DAVA Endava Ltd $0.26
GPC Genuine Parts $1.35
ADI Analog Devices $1.32
EQT EQT -$0.27
OC Owens Corning $1.37
GRMN Garmin $1.39
CRL Charles River Laboratories $2.11
NI NiSource $0.33
HSIC Henry Schein $1.00
HLT Hilton Worldwide $0.03
FUN Cedar Fair -$2.28
COMM CommScope $0.44
CHH Choice Hotels International $0.64
ALE Allete $0.75
WIX WIX -$0.11
PXD Pioneer Natural Resources $0.70
SUN Sunoco $0.82
JACK Jack In The Box $1.74
VCYT Veracyte -$0.10
RBC Regal Beloit Corporation $1.58
CF CF Industries $0.11
SPWR SunPower $0.11
BFAM Bright Horizons Family Solutions -$0.23
SNBR Scs Group Plc $1.42
VMI Valmont Industries $1.79
UFPI Universal Forest Products $0.72
SUI Sun Communities $0.09
ALSN Allison Transmission $0.61
AM Antero Midstream Partners $0.19
WCN Waste Connections $0.63
CDE CoEUR Mining $0.13
PEGA Pegasystems $0.23
GMED Globus Medical $0.51
TROX Tronox $0.19
CONE CyrusOne -$0.03
WRI Weingarten Realty Investors $0.10
AR Antero Resources $0.06
CAKE Cheesecake Factory -$0.04
HPP Hudson Pacific Properties $0.05
AEL American Equity Investment Life $0.97
OGS One Gas $1.06
MOS Mosaic $0.20
H Hyatt Hotels -$1.37
MRO Marathon Oil -$0.20
PAAS Pan American Silver USA $0.43
QTWO Q2 $0.05
MANT ManTech International $0.71
HLF Herbalife $0.84
LOPE Grand Canyon Education $1.79
BIDU Baidu $17.78
SNPS Synopsys $1.47
ALB Albemarle $1.10
STMP Stamps $2.92
AJRD Aerojet Rocketdyne $0.50
ETR Entergy $0.68
GDOT Green Dot $0.16
DISH Dish Network $0.75
AU Anglogold Ashanti $1.85
CBD Companhia Brasileira De Distrib $0.46
TS Tenaris $0.01
TLRY Tilray -$0.14
MIC Macquarie Infrastructure $0.21
SAM Boston Beer $2.63

 

Thursday (February 18)

IN THE SPOTLIGHT: WALMART

Walmart, an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores from the United States, is expected to report a profit of $1.51 in the fourth quarter, which represents year-over-year growth of over 9% from the same quarter last year when the company reported profit of $1.38 per share.

Zacks Research forecasts Walmart‘s Q4 comparable sales to pop 5.2%, with its adjusted EPS set to climb 6.5% to $1.47 a share.

“On the top-line, we think market expectations are for 6-8% US comps, low double-digit Sam’s Club SSS growth, and mid-single-digit International revenue growth. We believe the buy-side is anticipating 40-60 bps of gross margin expansion and 20 bps SG&A leverage, translating to 70 bps of EBIT margin expansion and 25%+ EBIT growth. Overall, the bar for Q4 EPS seems to be in the range of $1.75-1.85,” said Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 18

Ticker Company EPS Forecast
EPAM EPAM Systems $1.71
LXP Lexington Realty $0.08
BRC Brady $0.61
CFX Colfax $0.50
SYNH Syneos Health Inc $1.10
LKQ LKQ $0.58
GOLD Randgold Resources $0.31
RS Reliance Steel & Aluminum $1.96
SCL Stepan $1.08
DAN Dana $0.38
VC Visteon $1.14
WMT Walmart $1.51
MAR Marriott International $0.09
FOCS Focus Financial Partners Inc $0.77
SO Southern Co. $0.42
WM Waste Management $1.09
VG Vonage $0.05
IDCC InterDigital -$0.02
TRN Trinity Industries $0.15
TPH Tri Pointe Homes $0.67
IART Integra LifeSciences $0.73
WAB Westinghouse Air Brake Technologies $1.03
TRP Transcanada USA $0.78
IDA IdaCorp $0.67
SHLX Shell Midstream Partners $0.33
NICE Nice Systems $1.55
WST West Pharmaceutical Services $1.12
VTR Ventas $0.07
HL Hecla Mining $0.02
PPL PPL $0.61
AVNS Avanos Medical Inc $0.21
NEM Newmont Mining $0.95
HRL Hormel Foods $0.41
MD Mednax $0.36
TRGP Targa Resources $0.32
EBS Emergent BioSolutions $3.28
GLPI Gaming And Leisure Properties $0.56
TXRH Texas Roadhouse $0.49
COG Cabot Oil Gas $0.21
ATR AptarGroup $0.90
CWST Casella Waste Systems $0.14
QDEL Quidel $9.76
CVA Covanta -$0.01
OPK Opko Health $0.04
ROG Rogers $1.42
OLED Universal Display $0.64
KEYS Keysight Technologies $1.36
LNT Alliant Energy $0.23
ANET Arista Networks $2.39
HST Host Hotels & Resorts -$0.42
HASI Hannon Armstrong Sustnbl Infrstr Cap $0.34
ED Consolidated Edison $0.76
RBA Ritchie Bros. Auctioneers USA $0.58
TRIP TripAdvisor -$0.26
RXT Rackspace $0.23
DBX Dropbox $0.24
AMAT Applied Materials $1.28
MSA MSA Safety $1.05
ADC Agree Realty $0.83
FLS Flowserve $0.53
AG First Majestic Silver $0.11
SNN Smith Nephew $1.18
GFI Gold Fields $0.35
BCS Barclays -$0.01
CS Credit Suisse $0.22
ORAN Orange $0.45
CPRT Copart $0.79
ARRY Array Technologies Inc $0.05
AEP American Electric Power $0.79
PBR Petroleo Brasileiro Petrobras $0.02
VALE Vale $0.90
TCP TC Pipelines $0.98
FSLR First Solar $1.27
USM United States Cellular -$0.02
RY Royal Bank Of Canada $1.68
TDS Telephone Data Systems $0.03
GOL Gol Linhas Aereas Inteligentes -$0.41
PCRX Pacira $0.82
NCLH Norwegian Cruise Line -$2.31
RGEN Repligen $0.31
TV Grupo Televisa Sab $0.25
ENV Envestnet $0.65
FMS Fresenius Medical Care $0.70
TFX Teleflex $3.03
PAC Grupo Aeroportuario Del Pacifico $0.46
NUVA NuVasive $0.55
SATS EchoStar $0.00
CIB Bancolombia $0.15

 

Friday (February 19)

IN THE SPOTLIGHT: MAGNA INTERNATIONAL

Magna International, one of the largest and most diversified auto parts suppliers in the world, is expected to report a profit of $2.02 in the fourth quarter, which represents year-over-year growth of over 40% from the same quarter last year when the company reported profit of $1.41 per share.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 19

Ticker Company EPS Forecast
THRM Gentherm $0.65
BCPC Balchem $0.69
POR Portland General Electric $0.42
ITT ITT $0.92
SRC Spirit Realty Capital New $0.18
MGA Magna International USA $2.02
ESNT Essent $1.21
DE Deere & Company $2.12
HBM HudBay Minerals Ord Shs -$0.07
AEE Ameren $0.42
TKC Turkcell $0.15
DANOY Danone PK $0.45
HMSY HMS $0.44
CNK Cinemark -$1.46
E ENI $0.01

 

Three Retailers Trading At All-Time Highs

Wall Street analysts expect a strong 2020 holiday season despite the pandemic, with e-commerce sales continuing their torrid growth pace. Many brick and mortar retailers should outperform as well because well-constructed online sales portal will add to modest in-store purchases. However, storefronts without a strong internet presence are likely to flounder, with the growing infection rate keeping many customers out of virus-ridden closed ventilation systems.

Let’s look at three hybrid retailers hitting all-time highs as we get closer to the holidays and year’s end. These are big cap companies that have adapted well to the age of the Internet, with an expanding customer base utilizing curbside pick-up and package delivery as well as physical shopping trips. Of course, this is the ‘new normal’, with retailers that waited too long to open or expand online sales, like America’s struggling mall anchors, having a tough time paying the bills.

Walmart

Dow component Walmart Inc. (WMT) waited until 2016 to get in the e-commerce game, buying Jet.com for a hefty premium. They’ve now combined that operation into a robust site that’s emerged as the primary competitor to Amazon.com Inc. (AMZN). The company has also launched a membership program to rival Prime, setting the stage for an epoch retail battle. In the meantime, the stock is trading just five points below November’s all-time high while holding onto a 26% year-to-date return.

Target

Target Corp. (TGT) has emerged as 2020’s top retail performer, taking market share from equal-sized and smaller rivals during the first quarter’s pandemic decline. The company blew away Q3 2020 estimates in November, picking up additional market share through strong execution. Same day and drive-up sales exploded during the quarter, growing 200% and 500% year-over-year, respectively. As the company noted, customers have shifted spending from travel into the goods they sell, raising odds for continued strong growth in 2021.

TJX

TJX Companies Inc. (TJX) sells home basics, apparel, and home fashions through T.J. Maxx, Marshalls, Homesense, and Sierra stores. This ‘off-price’ operation provides a less robust online sales portal than Walmart or Target and has no curbside pick-up. However, it executes so well that investors keep buying the stock, which is trading less than one point under an all-time high. Even so, this issue will carry greater downside risk through the winter months due to the surging pandemic.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Walmart Earnings Beat Wall Street Estimates; Buy with Target Price $175

Walmart Inc, an American multinational retail corporation that operates a chain of hypermarkets, reported better-than-expected revenue and profit in the third quarter, largely driven by a surge in online sales as buyers purchased everything from the comfort of their homes amid the COVID-19 pandemic.

The world’s largest retailer by revenue said its online sales grew 79% with total revenue increasing 5.2% to $134.71 billion, beating market expectations of $132.23 billion. Walmart sales at U.S. stores open at least a year rose 6.4%, beating Wall Street consensus of 4.16% growth.

Walmart reported adjusted earnings of $1.34 per share, topping analysts’ expectations of $1.18. International net sales were $29.6 billion, an increase of 1.3%.

“We would characterize this as more of a true upside surprise, even though comps were up 9.3% last quarter. Recall that Walmart started the period off slowly due to a late start to back to school. These results suggest that trends may have improved a bit as the quarter went on. Most line items followed a similar pattern. But, overall, we see these results as supportive of our BUY rating even as the stock hit an all-time high yesterday,” said Michael Baker, MD and Senior Research Analyst at D.A. Davidson & Company.

“We believe Walmart takes share in strong environments and also outperforms in tougher economies. The key to the stock today will be comments on trends throughout the quarter as well as early 4Q as the pandemic re-surges,” Baker added.

Despite this optimism, Walmart shares traded nearly flat at $152.30 on Tuesday; the stock is up about 30% so far this year.

Executive Comments

“This was another strong quarter on the top and bottom line. Our associates continue to impress during this challenging year. They are working together to serve customers and communities in new, relevant ways and we’re very proud of them. We think these new customer behaviours will largely persist and we’re well-positioned to serve customers with the value and experience they’re looking for,” Doug McMillon, President and CEO at Walmart.

Walmart Stock Price Forecast

Twenty-six equity analysts forecast the average price in 12 months at $152.19 with a high forecast of $175.00 and a low forecast of $130.00. The average price target represents a 0.07% increase from the last price of $152.09. From those 26 analysts, 21 rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $150 with a high of $240 under a bull-case scenario and $95 under the worst-case scenario. The firm currently has an “Overweight” rating on the multinational retail corporation’s stock. Walmart had its price target raised by Jefferies Financial Group to $170 from $165. Jefferies Financial Group currently has a buy rating on the retailer’s stock.

Several other analysts have also recently commented on the stock. The Goldman Sachs Group reaffirmed a buy rating and set a $144 target price on shares of Walmart. Cowen reissued a buy rating and issued a $155 price objective. Telsey Advisory Group lifted their price objective to $145 from $140 and gave the stock an outperform rating. At last, JP Morgan restated a neutral rating and issued a $137 target price.

As our previous target of $150 has been achieved, we have updated our target to $175 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“We expect Walmart to sustain recent momentum in its core business in F’21/F’22 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $150 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers in the current COVID-19 environment,” said Simeon Gutman, equity analyst at Morgan Stanley.

Upside and Downside Risks

Risks to Upside: 1) Comps accelerate to +MSD-HSD led by continued Grocery strength. 2) Sustainable US e-comm growth of 50-60%+ behind Click & Collect momentum. 3) PhonePe gains wider market appreciation, driving incremental multiple expansion. 4) Walmart+ gains more traction than expected – highlighted by Morgan Stanley.

Risks to Downside: 1) E-commerce loses begin to rise again after briefly moderating. 2) US e-comm growth slows to <30% (comps <2%). 3) Greater than expected Flipkart losses.

Check out FX Empire’s earnings calendar

Blame it on The Nasdaq

US data announced this week showed a significant recovery in building permits and housing, building permits (MoM) for July surged to 18.8% compared to the previous 3.5%, Housing Starts data revealed 22.6% which is 5.1% higher than the previous month, existing-home sales data were as well positive reported beyond expectations.

Despite the negative Jobless claims and Philadelphia Fed Manufacturing PMI reported on August 20, Manufacturing PMI and Services PMI demonstrated a significant improvement, which led major US Indices to surge whereas S&P500 and Nasdaq100 reached the all-time high.

US stocks continue hitting records, Tesla surged by 24.19% breaking the significant $2000 per share value, and is now worth more than $382 billion surpassing Walmart by nearly $10B. Nasdaq’s top company by market cap – Apple gained 8.23% hitting the $2127B in capitalization. Tesla and Apple remain the top popular shares last week based on Robinhood data.

S&P500 closed above the all-time high, some might think that there is a possible double top pattern, economic recovery of the US indicates that the index may continue the run towards $3500.

Nasdaq owes its gains not only to Tesla and Apple, but there are also other tech companies that surged last week and during the pandemic, such as NVIDIA, AMD, Qualcomm, Microchip Tech, Texas Instruments.

An hourly chart demonstrates that the correction is most likely will happen as the price touched the dynamic resistance and the fifth wave of an ending diagonal is about to complete at 11600. Ending diagonal is a trend reversal pattern, which usually demonstrates exhaustion of bulls, note the evening star doji, though the closing is above the previous close, it still shows uncertainty and exhaustion.

NDX chart by TradingView

How is it related to cryptocurrencies and Bitcoin?

Bitcoin and Ethereum price actions are considered as cryptocurrency market movers. Since Bitcoin is nowadays considered as the digital Gold and Ethereum as a digital Silver, their price action now is correlated to US data which effect Gold. Gold was ever since used as a safe-haven to hedge funds during the uncertain times and inflation, so is Bitcoin now.

An hourly chart of Bitcoin indicates that the price could decline further to towards $11200 – $11160 to complete the Head and Shoulders pattern, another pattern to watch is an ending diagonal which is yet to be completed as well. Bitcoin remains below the major resistance level of $11700 an in order to show another bull run it must break the dynamic resistance (ending diagonals upper edge) and close above the 11700, however testing 11200 might bring another stimulus for bulls.

BTCUSD price on Overbit

Ethereum plummeted to $380 after reaching the year’s maximum at $446.67, loosing 9.7% this week only. Digital Silver price is following a similar ending diagonal pattern, and if the upper dynamic resistance and a static resistance of 397 is not overpassed, ETH might continue the drop towards a major support at $380, and if that support is broken, towards $370 – 369.

ETHUSD price on Overbit

Unlike Bitcoin, Gold lost only 0.20% in price for the week. A significant drop was on Wednesday August 19 ahead of US data announcements, where the precious metal lost 3.67% after gaining 2.97% on Monday and Tuesday.

Head and shoulders pattern is identified on an hourly chart of Gold and the price might continue the drop down to $1881.60 – 1880, where if the support laid on those level withheld the price might retrace towards 2014 and if above towards 2046, where the bearish pattern will be completed.

Gold price on Overbit

Since Gold and Silver prices demonstrate similarities in their price action, the same Head and Shoulders is visible on an hourly chart of XAGUSD. The price is below the dynamic support of August 12 which might signal to a further decline down to $25.30.

Silver price on Overbit

The price continues the short-term downtrend move inside a descending channel, which in other had forms another controversial to the H&S pattern of Bullish Flag.

Silver price on Overbit

If bulls are able to push the price above the dynamic support and if the dynamic resistance is overtaken at $27, the bullish run might proceed towards $28 – 28.50.

Key takeaways for the upcoming week would be announcements from Eurozone, Great Britain, China and the US.

Important announcements to watch:

Tuesday, August 25, 2020

German GDP (YoY) as per Second quarter data is expected to be -11.7%, 9.8% lower than the previous -1.9%

German GDP (QoQ) as per Second quarter data is expected to be -10.1%, 7.9% lower than the previous -2.2

US CB Consumer Confidence (August) is expected to be 93, 0.4 points higher than the previous 92.6

US New Home Sales (July) is expected to be 786K, 10K higher than the previous 776K

Wednesday, August 26, 2020

US Core Durable Orders is expected to be 2.1%, 1.5% lower than the previous 3.6%

Thursday, August 27, 2020

US GDP (QoQ) as per 2nd Quarter is expected to be -32.6%, 0.3% higher than the previous -32.9%

US Initial Jobless Claims is expected to be 1,000K, 106K lower than the previous 1,106K

US Pending Home Sales (MoM) as per July is expected to be 4.5%, 12.1% points higher than the previous 16.6%

Asides from the data to be announced, there are other important events to trace.

Republican National Convention, which will be held on Monday, in which delegates will determine the nominees for the upcoming presidential elections. Markets will be watching this event closely as during the current campaign Democrats are having an edge over republicans.

Source: Yahoo Finance

Another major event would be an annual Jackson Hole conference this Thursday, August 27, where FED Chairman Jerome Powell will speak about current economic situation, inflation targets and possibly share preliminary focus on interest rate change.

The economic state and inflation in the US once again are an important constituent of the Global economy and global markets, all these events will be decisive for the mid-term price movements for the US Indices, commodities and cryptocurrencies.

Will Tesla Stock Price Crash?

Just today, Tesla surpassed Walmart’s market cap – how is that possible? Walmart has 534.66 billion in sales versus just 25.71 billion for Tesla.

TESLA DAILY CHART

The trend in TSLA is overbought. The MACD and the RSI (14) are diverging negatively, suggesting waning momentum. The stock is behaving like a commodity – not a business. I see the potential for a “buy the rumor sell the news” event after the stock splits. I think prices will correct at least 50%, and that is extremely conservative.

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Another way to measure Tesla’s ludicrous valuation is through total revenue – let me explain. Hypothetically speaking, let’s say a company paid 100% of its annual revenue to shareholders as a dividend. Of course, this is not possible, but it helps make my point. In the example below, we will measure how many calendar days it would take to recover your initial investment if each company paid 100% of their profits to shareholders at today’s stock price.

Time to recover initial investments:

Ford Motor Company (F) $6.66

Revenue 130.4 billion

Revenue Per Share $32.87

Time to recover initial investment 74-days

General Motors (GM) $28.56

Revenue 115.79 billion

Revenue Per Share $80.94

Time to recover initial investment 128-days

Walmart (WMT) $131.65

Revenue 534.66 billion

Revenue Per Share $188.23

Time to recover initial investment 255-days

Tesla (TSLA) $2042.41

Revenue 25.72 billion

Revenue Per Share $141.64

Time to recover initial investment 5263-days or over 14-years.

Lastly, the combined market cap of Ford, GM, and Fiat Chrysler (the big three) is 90-billion, and in 2019 they produced 7,470,370 vehicles. Tesla’s market cap is 300% greater than all three (307 billion), and they delivered only 195,000 vehicles – ASTONISHING.

What goes up – must come down. Will Tesla prices crash soon? Maybe – it is hard to say. Whatever the case, I think we will get a generational buying opportunity in TSLA next year or early 2022.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

Walmart Could End Long-Term Uptrend

Dow component Walmart Inc. (WMT) hit an all-time high and sold off earlier this week after posting a better-than-expected Q2 2020 profit of $1.56 per-share on a 2.8% year-over-year rise in revenue to $137.7 billion, also beating estimates. U.S. e-commerce sales grew an impressive 97% while quarterly comps rose 9%. Home improvement, sporting goods, landscape, and electronics all reported strong increases while back-to-school sales have lagged due to pandemic shutdowns.

Walmart Picking Up Market Share After Competitors Close

The retail giant surged to an all-time in March, building first quarter market share while smaller competitors shut their doors in reaction to stay-at-home and quarantine orders around the globe. A robust e-commerce portal also allowed Walmart to compete forcefully with Amazon.Com Inc. (AMZN), while both mega-caps picked up permanent market share. However, 2020 leaders have now fallen out of favor, with large chunks of capital rotating into beaten-down recovery plays.

Telsey Advisory Group raised their target from $140 to $145 on Wednesday, with analyst Joseph Feldman noting “we believe Walmart is well-positioned to gain market share in this volatile market, given its defensive core product mix, renewed focus on discretionary categories, and solid digital/omni-channel initiatives. Furthermore, newer initiatives, such as the expansion of third-party marketplace services, new health clinics, and a potential membership program, should all fuel growth”.

Wall Street And Technical Outlook

Wall Street consensus has deteriorated since the earnings release, with a ‘Moderate Buy’ rating based upon 17 ‘Buy’ and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time. Price targets currently range from a low of $130 to a street-high $160 while the stock is now trading right on top of the low target. This is dangerous positioning because it could trigger further downgrades.

The stock has been under aggressive selling pressure since February, despite a volatile uptrend that carved four new highs between March and August. This odd conflict establishes a major bearish divergence, warning that smart money has been using higher prices to unload large positions. This is a potent combination that often precedes major tops, telling shareholders to take defensive measures and consider moving to the sidelines.

Walmart Posts Record Surge in Q2 Online Sales; Buy with Target Price $150

Walmart Inc, an American multinational retail corporation that operates a chain of hypermarkets, said its total revenue increased 5.6% in the second quarter to $137.7 billion and posted its biggest growth in online sales as buyers purchased everything from the comfort of their homes amid COVID-19 pandemic.

The world’s largest company by revenue said its U.S. sales increased 9.3%, led by strength in general merchandise and food and U.S. eCommerce sales grew 97% with strong results across all channels. Growth in membership income was the highest quarterly increase in more than five years. New member count increased by more than 60%.

“We like Wal-Mart’s global scale, extensive international growth opportunity, increasing focus on e-commerce and smaller Neighborhood Markets, and the company’s status as a large-cap defensive stock,” said Oliver Chen, equity analyst at Cowen.

“We believe improving US comps and the health of the US consumer are key positives for the stock and believe top-line momentum is set to continue in FY21 & FY22 driven by price investments and an improved store experience. We rate WMT Outperform with a $155 price target on ~28x our FY22 EPS of $5.50E,” Chen added.

The company said its operating income rose 8.5% to $6.1 billion in the quarter, while adjusted earnings per share of $1.56.

However, Walmart said its international net sales were $27.2 billion, a decrease of 6.8% as volatile currency rates negatively affected net sales by approximately $2.4 billion. The company’s net sales and operating results were significantly affected by a continuation of the global health crisis.

Walmart shares closed 0.6% lower at $134.7 on Tuesday, but it is up over 13% so far this year.

Walmart stock forecast

Twenty-two analysts forecast the average price in 12 months at $142.35 with a high forecast of $160.00 and a low forecast of $130.00. The average price target represents a 5.67% increase from the last price of $134.71. From those 22, 16 analysts rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $150 with a high of $240 under a bull scenario and $95 under the worst-case scenario. D.A. Davidson raised the price target to $154 from $148 and RBC raised it to $137 from $132.

Other equity analysts also recently updated their stock outlook. Keybanc raised the price target to $150 from $138, Raymond James upped the price objective to $145 from $140, Jefferies increased it to $157 from $151 and Stifel upgraded it to $130 from $125.

We think it is good to buy at the current level and target $150 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“We expect Walmart to sustain recent momentum in its core business in F’21/F’22 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $150 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers in the current COVID-19 environment,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We think the launch of Walmart+ could serve as a sustainable positive tailwind for the stock (assuming the program benefits are made clear through disclosure of subscriber numbers or higher sales growth). In our base case we have estimated up to 20 million members may be willing to sign up for Walmart+ within six months of launch (per our AlphaWise survey data). Assuming a 1.7x spending uplift for existing Walmart shoppers that sign up for the program and breakeven e-commerce operations by the fifth year of membership yields $30 billion of NPV for Walmart ($10/share).”

Upside and Downside risks

Upside: 1) Comps accelerate to +MSD-HSD led by continued Grocery strength. 2) Sustainable US e-comm growth of 50-60%+ behind Click & Collect momentum. 3) PhonePe gains wider market appreciation, driving incremental multiple expansion. 4) Walmart+ gains more traction than expected – highlighted by Morgan Stanley.

Downside: 1) E-commerce loses begin to rise again after briefly moderating. 2) US e-comm growth slows to <30% (comps <2%). 3) Greater than expected Flipkart losses.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Needs to Close Over 3379.75 to Sustain Rally

September E-mini S&P 500 Index futures are expected to open higher based on the pre-market trade. Supporting the rally are bullish earnings reports from Home Depot and Walmart, which are setting an upbeat tone ahead of the cash market opening.

The benchmark futures contract hit a record high during Asian trading hours but later lost steam as caution over a Sino-U.S. spat grew after President Donald Trump announced further restrictions on tech giant Huawei Technologies Co.

At 12:07 GMT, September E-mini S&P 500 Index futures are trading 3384.25, up 4.50 or +0.13%.

Home Depot rose 2.8% in the premarket, putting it in a position to set a record high. Wal Mart shares shot higher by 5.5% in premarket trading.

In other news, retailer Kohl’s lost 25 cents per share for its latest quarter, smaller than the 83 cents a share loss that Wall Street analysts had anticipated. Auto parts retailer Advance Auto Parts earned $2.92 per share for the second quarter, well above the $1.98 a share consensus estimate.

Daily September E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the last high at 3382.50 earlier in the session.

The main trend is safe for now. It will change to down on a move through 3195.00. This is highly unlikely, but due to the prolonged move up in terms of price and time, the index remains inside the window of time for a potentially bearish closing price reversal top.

The new minor range is 3319.50 to 3388.75. Its 50% level at 3354.00 is the nearest support. Look for the short-term upside bias to continue as long as this level holds. This level is dynamic so it will move up if the market continues to make higher-highs.

The short-term range is 3195.00 to 3388.75. The minor trend will change to down on a trade through 3319.50. If it does then momentum will shift to the downside with the retracement zone at 3291.75 to 3269.00 the next likely downside target.

Daily Swing Chart Technical Forecast

Given the early price action, the direction of the September E-mini S&P 500 Index on Tuesday is likely to be determined by trader reaction to 3379.75.

Bullish Scenario

Holding above 3379.75 will indicate the presence of buyers. If this creates enough upside momentum then look for buyers to make a run at the February 20 main top at 3396.50. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 3379.75 will signal the presence of sellers. This could trigger a break into the minor 50% level at 3354.00.

A close below 3379.75 will form a closing price reversal top. If confirmed, this could trigger a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.