Retail giant Wal-Mart ( WMT ) will report its fourth-quarter results before the market open February 20. The consensus calls for earnings of $1.36 per share, up from $1.30 during the same period last year. The stock has appreciated 4.0% on the year.
WMT was recently trading at $102.85 down $7.13 from its 12-month high and $34.24 above its 12-month low. Overall technical indicators for WMT are bullish and the stock is in a strong upward trend. The stock has recent support above $96.50, and recent resistance below $103.50. Of the 21 analysts who cover the stock, 10 rate it a “strong buy”, and 11 rate it a “hold”. WMT gets a score of 68 from InvestorsObserver’s Stock Score Report.
Wal-Mart has been very smart with its investments in recent years. Boosting its minimum wage and investing heavily in its e-commerce business has paid off with a better in-store customer experience, and its online sales have improved to the point where the company is now considered a rival to Amazon.com’s ( AMZN ) online dominance. While earnings have fallen on average by 4.5% annually over the last five years, the company’s recent emphasis on employee morale and its online business are expected to yield earnings growth of 12.2% next year, and 7.1% per annum over the next five years. Wal-Mart was a little late to the online party, but it has definitely emerged as a major player, which bodes well for the company moving forward. The consensus calls for earnings of $1.36 for the quarter, but the street expects a little better, with a whisper number of $1.38. Analysts have an average price target of $108.33 on the stock.
Stock Only Trade
If you’re looking to establish a long stock position in WMT, consider buying the stock under $104.00. Sell if it falls below $93.60 or take profits if it gets to $119.50.
If you want a bullish hedged trade on the stock, consider an April 85/90 bull-put credit spread for a 30-cent credit. That’s a potential 6.4% return (37.0% annualized*) and the stock would have to fall 13.2% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an April 120/125 bear-call credit spread for a $025 credit. That’s a potential 5.3% return (30.5% annualized*) and the stock would have to rise 15.6% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider an April $105.00 covered call. Buy WMT shares (typically 100 shares, scale as appropriate), while selling the April $105.00 call for a debit of $100.25 per share. The trade has a target assigned return of 4.7%, and a target annualized return of 27.7% (for comparison purposes only).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com
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