Walmart (NYSE: WMT) exceeded earnings estimates with $6.46 per share (Estimated: $6.28). Net sales increased by 5.24%, and revenue rose by 5.7% to $161.10 billion, surpassing the consensus of $160.27 billion. CEO McMillion stated that jobs, wages, and pockets of disinflation are benefiting WMT’s customers. However, rising energy prices, resuming student loan payments, higher borrowing costs, and the drawdown of excess savings are putting pressure on household budgets.
Following the earnings report and a cautiously optimistic earnings call, the share price dropped by more than 2% yesterday. The selling pressure from the S&P 500 and proximity to key resistances also contributed to this decline. If the disinflation process resumes with a soft landing achieved by the Federal Reserve (FED), WMT could be a relatively safer option in the next 12 months. The price-to-sales ratio fell to 0.666, just above the 5-year average of 0.6505, indicating that it is not overly valued at the moment. However, the potential for upside gains may remain limited.
The support at 153.50 could be crucial for WMT in the short to medium term. The 50-day moving average, a key horizontal support, and a short-term trendline all converge around this point. Yesterday’s selloff could present a buying opportunity, unless it breaks this level. Previously, when the Relative Strength Index (RSI) fell below 40, WMT usually formed a bottom as long as the uptrend continued.
To enable possible upward movement to continue, a breakout above the 161.20 resistance could be essential in the coming weeks. Conversely, a downward break of 153.50 might lead the share price to the medium-term trendline, currently situated at 147.55.
