Does Wal-Mart Have a Bright Future?

With shares of Wal-Mart (NYSE:WMT) trading around $76, is WMT an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Wal-Mart operates retail stores in various formats around the world. The company aims to price items at the lowest price every day. Wal-Mart operates in three business segments: the Walmart U.S. segment, the Walmart International segment, and the Sam’s Club segment. It manages retail stores, restaurants, discount stores, supermarkets, super centers, hypermarkets, warehouse clubs, apparel stores, Sam’’s Clubs, neighborhood markets, and other small formats, as well as Walmart.com and Samsclub.com. Through its retail channels, Wal-Mart is able to provide a variety of products and services at affordable prices to consumers and companies worldwide.

In Wal-Mart’s desire to become America’s top beer retailer, it has been selling Budweiser, Coors, and other brands almost at cost in some stores. Internal documents seen by Bloomberg indicated that the markup on a 36-pack of Coors Light cans at a Los Angeles-area store came to 0.6 percent versus 16.2 percent for a package of Flaming Hot Cheetos. Retailers rarely divulge data regarding markups, so the March data allow an unusual glimpse of Wal-Mart’s alcohol pricing strategy. The giant retailer’s move into beer is part of a plan to double alcohol sales by 2016 and grab a bigger piece of the domestic beer market, which is worth around $45 billion.

T = Technicals on the Stock Chart Are Mixed

Wal-Mart stock has made solid progress in the last couple of years. The stock has been trading sideways for most of this year and is now trading near yearly mid-prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Wal-Mart is trading between its key averages, which signals neutral price action in the near-term.

WMT

Source: Thinkorswim

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