You might recall the day back in mid-January when Walmart (WMT) announced both layoffs and entry-level wage increases on the same day. I was interviewed on CNBC regarding the news and announced that I had sold much of my stake in anger because a number of employees had seemingly been terminated without notice. They reportedly found out only when denied access to their now-closed stores.
Walmart stock went higher after that, hitting $109.98 before January's end. Maybe I looked a little foolish, but I didn't care. After all, I've been (and in many ways still am) a little guy. Those are my people, and that day I was ticked off.
Well, Walmart reported fourth-quarter earnings last week and missed earnings-per-share expectations despite solid revenues. Perhaps most alarming to investors were two items. First, the firm guided full-year EPS below expectations, and second, it saw year-over-year growth in U.S. e-commerce sales slow to 23%.
Dividend increase? Yeah, nice try guys.
The real question now is: "Is Walmart safe here?" Well, did you listen to the call or read the transcript? There was no mention of going out of business, although markets acted like there was.
Sales? They still dwarf Amazon's, and Walmart trades at 17.6x forward earnings. That puts Walmart in line with both the Dow industrials and the S&P 500. Action Alerts Plus holding Amazon (AMZN) ? Oh, that trades at around 90x forward earnings.Let's take a look at Walmart's chart:
MACD? Putrid. Relative Strength? Awful. Money Flow? Gross.
Yet I feel that the name might have reached a short-term bottom. After Walmart took off in late September and ran through to those late January highs, the stock's recent plunge took it very close to a 61.8% retracement.
Now, the pitchfork pattern above is a little awkward, but starting the model above prior to Walmart's mid-November spike could have warped the results, as sentiment clearly changed at that point.
You can see the technical sell-off prior to earnings looks to have been caught by the central trend line, with an attempt at pre-earnings support made there. You see another plunge following the earnings report's release, but you don't see a broken pitchfork, do you?
If my model above is valid, Walmart's new target price would be $98, as that would be a 38.2% retracement of the stock's recent beat-down. My position is still small in this name, but I'm extremely likely to start rebuilding my long at these prices after this column has been public for several hours.
TheStreet discussed the Amazon vs. Walmart battle on its newest podcast "Technically Speaking." Listen below.