Will Summer Sales Boost Wal-Mart Stock?

With shares of Wal-Mart (NYSE:WMT) trading around $77, 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 operates retail stores, restaurants, discount stores, supermarkets, supercenters, 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 very affordable prices to consumers and companies worldwide.

Wal-Mart is an especially hot place for summer lovers to take advantage of, as it provides a one-stop shop for anything a beach bum’s heart desires. Customers know that they can get in and out of Wal-Mart quickly and find all of their summer gear at relatively low prices. One out of three customers give Wal-Mart’s summer products a perfect 10, and 33.8 percent assert that they would be extremely likely to recommend the store. Wal-Mart is undoubtedly looking at a very successful summer sales quarter. For consumers and businesses looking for one location that contains a wide variety of products and services, Wal-Mart is the spot and will continue to be well into the future.

T = Technicals on the Stock Chart are Strong

Wal-Mart stock has been surging higher over the last couple of years. The stock is now consolidating near all-time high prices so it may need some time before its next move. 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 slightly above its rising key averages which signal neutral to bullish price action in the near-term.

WMT

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Wal-Mart options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Wal-Mart Options

16.21%

20%

18%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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