It’s been a rough stretch for the retail industry lately. All around the country, brick-and-mortar stores are cutting their workforces, closing their doors, and succumbing to the pressure of e-commerce.
Nevertheless, a few retail giants — like iconic American brand Wal-Mart Stores Inc (NYSE:WMT) — are hanging in there.
Walmart remains the country’s largest brick-and-mortar retailer, but it owes much of its recent success to the adaption of non-traditional techniques, including a large-scale investment in its online business. Investors are rewarding Walmart for its success in the face of a brutal retail landscape, and shares of the company have gained more than 15% year-to-date.
Of course, that’s quite the climb for any retail stock. And as this stock continues to trade near its 52-week high, it makes sense that some investors might worry whether WMT has entered into “overbought” territory.
So should you still be buying WMT on the back of its strong momentum, or is now the time to consider selling? Let’s start by digging into some of the fundamentals.
First, let’s hone in on Walmart’s recent e-commerce growth.
As mentioned, the company has really doubled down on its online efforts, pumping serious cash into developing this unit. Amazon.com, Inc. (NASDAQ:AMZN) will always remain the e-commerce king, but a healthier online presence actually gives Walmart one specific advantage in its war against online retail’s royalty.
As we are beginning to see, Walmart can leverage its worldwide brick-and-mortar locations to provide delivery services that Amazon simply can’t. Take China, for example.
Through its partnership with JD.Com Inc (ADR) (NYSE:JD), Walmart offers one-hour delivery in the Asian country (also read: Walmart is Crushing Amazon in China).
Walmart is also testing out a new delivery service that utilizes its in-store workers to boost its e-commerce business. In certain markets, the company is exploring the idea of letting employees make same-day deliveries on their way home from work (also read: Wal-Mart New Delivery Program to Retain Store Workers).
Nevertheless, we can see that these e-commerce investments, along with other costly initiatives like price promotions, are cutting into Walmart’s bottom line. Our current consensus estimates are calling for a nice 2% bump in total sales this year, but we’re only expecting to see EPS growth of 0.78%.
Furthermore, Walmart is only a Zacks Rank #3 (Hold) right now. This is primarily because of its mixed earnings estimate revision activity:
Based on the above snapshot of the recent estimate revisions we’ve seen, it’s clear to see that there has been little agreement on the company’s current-quarter and next-quarter earnings. This has resulted in stagnant Zacks Consensus Estimates over the last 60 days.
However, if we are going to mention its sluggish revision activity, we should probably also note that WMT has strong grades in our Style Scores system.
Indeed, the stock currently has “A” grades for Value, Growth, and our overall VGM category.
Now, let’s dig into some more technical details to see if Walmart’s latest price action tells us anything about what the stock might do next:
In the above charts, we must note that the three green lines indicate periods of bullish activity for the stock. Not only do we see support along the moving averages, but we also see corresponding strength in its Williams%R chart.
Starting with the first line, we see WMT storm into overbought territory, and the second line shows a reluctance to dip into oversold territory, followed by a steep charge back into the overbought area. Remember, an ability to bounce back from downtrends is typically considered a sign of strength on the Willams%R chart.
With that said, we should also note the stock’s current position on that chart. In many cases, a dip to below -50 from overbought indicates that it is time to sell. However, we have seen that WMT can recover from these dips.
It’s also worth noting a couple more things. First of all, as we can see from our final chart, all of this movement has happened with very little effect on the amount of money pumping into the stock. This might imply that investors are so bullish on the stock that these fluctuations have not had an impact on volume.
And finally, these pieces of analysis will all depend on your preferred method of trading. For some, buying in at a 52-week high is always a no-go, but others might disagree with that. Regardless, it will be incredibly interesting to see how shares of this massive retailer perform at these levels.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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