PreMarket Prep Stock Of The Day: Walmart

Trading an issue following an earnings report can be difficult. Several factors go into how the issue will react to the report, instead of investors just relying on the actual results.

Shareholders of Walmart Inc. WMT are disappointed in Tuesday’s price action following a third-quarter beat and raised guidance, making it the PreMarket Prep Stock of the Day.

Unusual Rally Ahead Of Report: Typically, Walmart will trade in a $10 range or so during a normal month. Sometimes it will be even less and chop around in a trading range that is created by the large institutional holders of the issue.

However, the issue caught a bid when it bottomed Oct. 4 at $134.71 and embarked on an impressive rally. Over the next 24 sessions, the issue neared its all-time high from December ($153.66) but came up shy, peaking on Nov. 4 at $152, From trough to peak, this marks a 12.8% rally in a short time span.

Ringing The Register: Since topping out at $152, the issue drifted lower, but sellers became more aggressive during the four-day losing streak heading into Tuesday’s report. On Monday, the issue made a new low for the decline ($146.40) and posted its lowest close since Oct. 20, ending the session at $146.91.

Walmart's Q3 Beat, Raised Guidance: Before the open, the company reported quarterly earnings of $1.45 per share, which beat the analyst consensus estimate of $1.40 by 3.57%. Also, the company reported quarterly sales of $140.53 billion, which beat the analyst consensus estimate of $135.60 billion by 3.63%.

In addition, the company raised FY22 Adj. EPS guidance from $6.20-$6.35 to $6.40 vs. a $6.33 estimate.
The company reassured customers that shelves will be loaded up for the holiday season: U.S. inventory is up 11.5% ahead of the holidays.

PreMarket Prep's Take: When the issue was being covered on the show Tuesday, it was trading in the lower $147 handle. It had already peaked in the premarket at $150.99. The author of this article was skeptical that the issue could regain its momentum and even test Monday’s high ($148.45),

Instead, investors were alerted that if the issue could not hold Monday’s ($146.40), there was limited support. In fact, it was suggested that if the issue really went into reverse, there was a potential gap fill down to the top of its Oct. 18 range at $142.01.

Price Action: After a lower open ($145.10 vs. $149.91), the issue rallied and was able to sneak into the bottom of Monday’s range, reaching $146.68, and resumed its move lower.

The issue has continued to make new lows for the session, with the current one standing at $142.30 as of 12:45 p.m. EST.

The full discussion on the issue from Tuesday’s show can be found here.