The Consumer Defensive space continues to be popular in 2024, as after Healthcare, it has the fewest analyst-driven “Sell” ratings.
Tradingbiz analyst Rahul Nambiampurath dives deeper into this space, unearthing Walmart (WMT), which might have short-term and long-term legs to help investors make a fortune.
“A moderate CPI growth of 0.3% should work in favour of players like Walmart,” mentions Rahul.
He adds that very low inflation or deflation can indicate weak economic demand. If consumers expect prices to fall further, they might delay purchases, leading to lower sales in the short term.
So, if inflation is low but moderately present, consumer purchasing power tends to rise as the cost of goods does not surge significantly.
Walmart (WMT) is trading at $59.83, up over 15% in the past six months. Rahul believes the Q4 2023 earnings report released in February 2024 had a major role in helping this Consumer Staples giant keep the gains. Some of the highlights were as follows:
- A 5.7% surge in QoQ revenue
- A 6% surge in year-on-year revenue
- An adjusted EPS of $1.80
- A 32.2% surge in the operating income, year-on-year
But that wasn’t all. Rahul went deep and discovered the Q1, 2024 guidance levels. These included the following figures:
- A consolidated sales growth of 3.5%
- An adjusted EPS of $6.10, easily beating Q4, 2023
- A 4% rise in the operating income
Walmart’s Q4 2024 earrings report is due today, and if these levels hold, short-term traders can expect a 3% to 5% surge in prices.
Walmart (WMT) Technical Analysis
Per Rahul’s analysis, WMT’s daily price chart is slightly bearish, thanks to the bearish divergence projected by the relative strength index (RSI) indicator. If Q1 earnings come out as tepid, the market might help WMT bears breach the crucial support of $58.58. After this, WMT might even drop to $56.
Walmart Daily Chart: TradingView
However, if the next leg of the RSI, which has fallen below the yellow line or the 14-period moving average, moves above 60, it might invalidate the bearish trend. If it happens, a result-driven surge can take WMT as high as $61.70 in the short term. Post this, even a level of $65 is possible, per the Fibonacci retracement indicator.
Ivan Feinseth, an Analyst at Tigress Financial, has a “Buy” rating for WMT and a price target of 66.03, in line with Rahul’s analysis of the stock. At present, no WMT calls are sell calls, as analysts are only recommending Buy and Hold.
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