Walmart Looks Ready to Go Another Round

Shares of Walmart NYSE: WMT gapped up 3% to all-time highs on Thursday morning after the company reported their third-quarter earnings. While they subsequently retreated back to their pre-release levels by the end of the session, investors will by and large be happy to remain long.

The retail giant reported earnings, same-store sales, and total sales numbers that all beat estimates while its revenue was up as well. The big headline was reserved for growth in e-commerce sales which jumped 41%. Becoming and remaining competitive with Amazon has been a key goal and these numbers will give investors a lot of comfort and confidence in management’s ability to achieve this.

The company’s online grocery initiatives are playing out well and appear to be set up for success. Management announced Delivery Unlimited and InHome Delivery, two key plays designed to eat into Instacart and Amazon Fresh’s market share in grocery delivery. Investors got a cherry on top of all of this from the management by way of raised expectations for FY20 earnings.

The only hiccup was operating income which came in a little below estimates. However, Wall Street was quick to recognize the effect a non-cash impairment charge had on this. Without it, operating income would have increased.

Flipkart’s Performance

The inclusion of Flipkart was also a negative weight on operating income. Flipkart is India’s biggest e-commerce retailer and was purchased by Walmart for $16 billion last summer in a bidding war that saw them top Amazon’s best effort. E-commerce currently makes up only 4% of the Indian retail market but as access to the internet via smartphones increases rapidly in the company years, this number is expected to take off.

Flipkart is still a young division in Walmart’s portfolio but the fundamentals point to its long term potential and building momentum. While its not expected to be profitable for some years, last week’s report showed they were able to cut losses by 63% compared to last year, a sign that Walmart’s retail and supply chain experience is already having a huge effect.

All in all, Thursday’s report was a solid release that bodes well for Walmart’s future. Long term investors will know that it hasn’t always been this bright.

Walmart Stock Horizontal For 16 Years

From January 2000 to the autumn of 2015, Walmart’s stock gained 4.5%. Shares literally posted a four and a half percent gain in almost 16 years of trading. Amazon’s stock, on the other hand, was up 870% in the same time period. It appeared the writing was on the wall for one of the world’s largest employers.

However, they say a little competition is a great thing and from October 2015 through to today, Walmart’s stock is up 110% while Amazon’s is ‘only’ up 180%.

Through a huge push to e-commerce and initiatives like the Flipkart acquisition, Walmart appears to have successfully adapted while the latter has come to mature. It’s established itself as a leading e-commerce website and one of the only ones that are capable of competing on a large scale with Amazon.

Company Ready For The Holiday Season

Walmart stock has been on a solid run since the end of 2015 and is right at all-time highs after Thursday’s release. It’s been consolidating since early October and looks fairly healthy going into the last 6 weeks of the year. RSI is at 60 and the MACD is flirting with a bullish crossover. The stock’s 50-day moving average has acted as support several times in the past month and is a key technical level in the short term. There’s decent support in the $110 - $116 range if any investors were looking for some selling in order to start dipping a toe in and buy.

The next big date on the calendar for Wall Street will be Black Friday and the subsequent release of performance figures. Going into it, out of all the e-commerce retailers who’ve been trying to keep up with Amazon, Walmart looks best positioned to take the fight to them and go toe to toe.