Walmart (WMT), usually a Teflon-like stock, has lost a step.
The news: A so-so earnings day for Walmart on Thursday led to a nearly 7% decline in the stock, erasing about $67 billion in market cap. In the process, the stock fell below the key 100-day moving average for the first time this year (see chart below).
The 100-day moving average is a technical indicator that smooths out daily price fluctuations by calculating the average closing price of a stock over the previous 100 days, helping traders identify prevailing medium- to long-term trends.
Shares showed a minimal recovery in Friday’s premarket action.
The analysis: The retail giant surpassed Wall Street’s revenue expectations, bringing in $177.8 billion (a 7.3% year-over-year increase) and matching profit estimates with adjusted earnings per share of $0.66. Walmart saw a massive 26% surge in global e-commerce sales and 4.1% US same-store sales increase.
But the stock tumbled primarily because management’s guidance underwhelmed. Walmart projected second quarter earnings per share between $0.72 and $0.74 (below the $0.75 per share consensus) and reiterated a full-year earnings per share midpoint of $2.80, missing the $2.92 analysts had modeled.
Walmart CFO John David Rainey told Yahoo Finance that the business remains solid, but consumers are cautious.
“The second quarter has started pretty much how the first quarter ended,” Rainey said (video above). “We continue to combat high fuel prices and what is maybe a little bit of a choppy consumer environment. Certainly, the first quarter benefited from tax refunds. But look, our business is strong.”
What Wall Street is saying: Analysts have generally stayed positive on Walmart after the quarter and tepid guidance.
“Walmart delivered a resilient quarter with comps, eCommerce, and EPS all showing encouraging growth despite a meaningful fuel-cost headwind,” Jefferies analysts wrote. “U.S. comps were solid, and advertising and membership now represent ~1/3 of EBIT [operating profits], reinforcing the long-term margin algorithm. Importantly, fiscal year 2027 guidance was reiterated with second quarter EBIT improving meaningfully. As a result, we recommend buying on weakness, reiterate our price target and fiscal year EPS estimates, and see shares continuing to work over time.”
Citi analysts added, “Walmart stock has performed well, but a relatively high multiple makes ‘perfection’ the bar going into almost any earnings report. And in 1Q, the fear of a more competitive pricing environment and higher fuel costs weighed on the stock. However, while Kroger (KR) may be in the headlines today highlighting price investment, the promotional environment remains rational, and we can’t forget that Walmart is in a winning position with already-large price gaps.”
The bottom line: Walmart is fine fundamentally. But that doesn’t mean the stock is fine. Shares are still priced for perfection after the sell-off, and it appears growth may slow in the near term due to tough year-ago comparisons and a more cautious consumer.
That’s not a great setup to thunderously reclaim the 100-day moving average right now.
