Walmart's fourth-quarter earnings and 2018 profit forecast did not meet analysts' expectations. Its stock price slid 10.2% to $94.11 on Tuesday. Walmart shares fell another 2.75% on Wednesday.
Short sellers aim to profit by selling shares while a stock is on the way down and buying them back at a lower price.
"Short sellers were up $364 million of mark-to-market profits on the day," S3 Analytics said. "Walmart is the largest short in the Food & Staples Retailing sector with $3.4 billion of short exposure," the analytics firm added.
According to S3 Analytics, "Walmart shorts are up $279 million in mark-to-market profits year-to-date and $548 million in February alone."
The company also noted that "Walmart short interest had been climbing throughout 2017, up $823 million, or 43%, ending the year at $2.75 billion. Short interest continued to increase in January 2018, hitting a historical high of $3.94 billion on January 25, just before Walmart hit its historical price high of $109.55 on January 29."
"If traders think that Amazon.com will continue to be a market disruptor and eat into Walmart's market share and drive down margins, we should see Walmart short interest climb. But if traders think Walmart can hold its ground and repel Amazon's advances, Walmart short interest should continue to decline."
Meanwhile, why isn't Amazon cutting prices at Whole Foods? TheStreet debated on the latest edition of Jolt below.