Wal-Mart Stores, Inc. (NYSE:WMT) — Shares of WMT stock rallied 1.9% on Thursday after the world’s largest retailer announced better-than-expected quarterly earnings and raised its full-year guidance.
On Friday, S&P Capital IQ Equity Research raised its opinion on WMT stock to “Strong Buy” from “Buy” and increased its 12-month price target by $6 to $88. Its analysts also upped their 2016 earnings estimate by 7 cents to $4.40 per share. They noted, “We see higher wages, inventory improvements and the expansion of online offerings and in-store pick-up services supporting continued favorable U.S. comparable store sales and e-commerce sales trends.”
Earlier this month, Wal-Mart announced that it is acquiring online startup Jet.com for over $3 billion to help it compete with Amazon.com, Inc. (NASDAQ:AMZN).
Capital IQ considers WMT stock to be low risk based on its long-term earnings record and history of dividend increases. Wal-Mart’s board also approved a $20 billion share buyback program in October, which is expected to be completed by the end of 2017.
Turning to the chart, we see that WMT stock executed a major bullish reversal in December following an 11-month decline from a high at over $90. Since the reversal, it has traded in a well-defined bull channel with rising support at $72 and rising resistance at about $82. Within the channel, shares have consistently fluctuated around their 50-day moving average at $73. A strong, high-volume buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), occurred last week.
Traders should buy WMT stock under $74 with a target of $84 within 90 days. If successful, they will book a profit of at least 13.5%. Investors should also consider taking a position at the current price for long-term growth and income. Wal-Mart pays an annual dividend of $2 per share for a current forward yield of 2.8%.
