Wal-Mart Stores Inc. (WMT) — With over 10,000 stores, Wal-Mart is the largest retailer in the world, but it is being pressured by stagnant consumer spending. In its most recently reported quarter, U.S. comparable store sales grew 1.5%, but international sales felt the effect of stronger competition in the U.K. and slowing emerging market demand.
Going forward, increased spending on e-commerce and higher wages, as well as adverse foreign currency exchange rates, are expected to weigh on earnings growth and margins.
The consensus estimate is for fiscal 2016 (ending in January) earnings to decline 10.3% to $4.55 per share on a slight decrease in sales. While revenue is expected to increase 2.3% in fiscal 2017, EPS is forecasted to fall another 8.4% to $4.17.
Analysts’ mean target for WMT stock is $63.63, while the low-end target is $50.
Technically, WMT stock is in a bear market. The downtrend is clearly defined by a bear channel that extends from its January high above $90 to Wednesday’s close just above $60.
Shares are currently at the top of their range where, on Tuesday, they flashed a sell signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR). Volume is below average on advances and average on declines, an indication of poor institutional buying. MACD is flat, offering no support for a break of the bearish resistance line.
Sell WMT stock short at $60 or higher with a target of $52 for a potential gain of more than 13% in two months. A stop-loss order should be entered at $62 to protect against a breakout and the potential of a theoretically unlimited loss.
