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Buying Dips in Walmart
Walmart stock (WMT) suddenly plunged by nearly 6% on a pre-market trading after the giant discount store chain said it cannot rule out moderate damage from additional pressure on consumers wallets ahead of upcoming holiday season, which usually plays an important final chord for annual results. The warning partially offset a solid profit and sales beat for the latest quarter, which has been freshly released. Urgently buying dips in Walmart would be my common sense based response to the crowd's up-to-the-minute revaluation. After all, Walmart not only posted its better-than-expected numbers in both top and bottom lines, with $1.53 of EPS vs $1.50 a year ago, on a $160.8 billion of revenue vs $152.8 in the same quarter of 2022, but also raised its annual sales and profit forecast. I don't think that a couple of cautious comments from executives, like that shoppers were slowing purchases at the end of October, in contrast to brighter spending patterns earlier in the quarter, or like "there's just a flag that maybe there's reason to be a little more cautious on the consumer given some of what we've seen", could be a solid reason to doubt the multi-month uptrend in Walmart shares.
The stock already tried the same trick of falling down and then bouncing to even higher peaks after its August report, when its market price fell from $162 to $155 for a while, and then in two days of early October, when it quickly tested a technical support area between $151.5 and $155, with further coming back to move to a new all-time high at nearly $170 in mid-November. This could be the same pattern now, I suppose, bearing in mind Walmart's size (5,300 stores in the U.S.) and its ability to keep prices low for the economy class shopping despite inflation, as such a life-style is becoming popular even for higher-income consumers who want cheaper options for food and consumables, and sometimes for apparel or home goods too. Shopper visits already rose 3.5% in Q3, even though householders are "very choiceful and using discretion", waiting for promotional events like Black Friday and Cyber Monday, Walmart's chief financial officer John Rainey recalled, adding that his company would "outperform relative to others in this holiday period". I believe it would do so.
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