Walmart (WMT - Get Report) goes to the tape on Thursday morning. I was going to look at Nvidia (NVDA - Get Report) , but Huang goes to the tape Thursday afternoon, and I know that my loyal readers need a look at both, so here goes. The industry is expecting WMT EPS of $1.01 on revenue of $125.5 billion. Whispers are running slightly to the upside for EPS with a small miss possible for revenue. Know what I think? I think that if these numbers print in ballpark proximity, they might not matter that much. What will matter for the quarter reported will be same store sales growth, hopefully around 3%, and growth of the e-commerce segment. That growth printed at an unsustainable 40% for the second quarter. Walmart does not have to beat it's own performance there. They just have to beat Target's (TGT - Get Report) , while showing traction versus Amazon (AMZN - Get Report) . That's what is baked into the last sale.
Guidance will matter more than performance in determining market reaction as well. The fourth quarter is typically Walmart's most important for obvious reasons. The firm is currently guiding Wall Street toward revenue of $140 billion, or 2.7% growth. My gut says that this might be increased, but I know that I need to protect gains already made. We also need to hear something on what the firm expects from the Flipkart acquisition, in terms of expansion, performance, and negative impact upon margin.
This is one of the few names left in our universe sporting a Pitchfork model that survived October. The recent pullback ahead of earnings allows I think an increased level of comfort as well. Both Relative Strength, and the daily MACD show signs of loosing some steam,. However, there is no such signal being emitted by Chaikin's Money Flow indicator at this time.
Target Price: $110 (up from $108)
Panic Point: $98 (down from $99)
Wall Street Average Target Price: $107.85 (according to TipRanks)
How to Protect WMT Longs Through Earnings and the Holidays. (minimal lots, adjust for size)
-Assuming the need to protect gains on a long position of 100 shares.
-Sell one January $110 WMT call (last: $1.44)
-Purchase one January $97.50 put (last: $2.05)
-Sell one January $90 put (last: $0.76)
Note: The sale of the call, subsidizes the bear put spread, providing a net credit of 15 cents. What this setup also does is maximize profit at target price on an upward move, and allow for capital extraction of $7.50 on a negative move before plowing back in.
(A longer version of this column appeared at 8:22 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Stephen "Sarge" Guilfoyle, Jim Cramer and other experts throughout the market day.)