There have been some peculiar price movements in individual issues over the last few weeks, instigated by either earnings, forward guidance or corporate news. Perhaps the one with the most puzzling is Walmart Inc (NYSE:WMT), which is the PreMarket Prep Stock of the Day.
Head For The Hills: After the close Monday, July 25, Wal-Mart dropped a bomb on shareholders with a rare in-quarter announcement. That was lower guidance, not only for the second quarter, but for all of fiscal 2023.
Walmart said it expects adjusted earnings to decline between 8% and 9% in the second quarter and between 11% and 13% for the full year. The company maintained its expectations for comparable sales growth, excluding fuel, of about 3% in the second half of the year.
That news instigated a drastic move lower in the stock from $132.02 to $121.98.
Who Cares? Despite the longer-term guidance cut, investors piled into the issue as it approached the major support level at the $120 area from June. After bottoming on July 26 at $120.06, it rebounded to close at $121.98 and the issue embarked on a four-day winning streak.
In a remarkable fashion, the issue not only filled the void in price action from the guidance reduction, but surpassed it. On Monday, the issue peaked at $134.23 and posted its highest close for the recent rebound on Tuesday at $132.68.
Both levels are above the closing price prior to the surprise announcement, which was $132.02.
More Bad News: Before the open Thursday, The Wall Street Journal reported that after issuing a profit warning last week, Walmart is slashing hundreds of corporate roles in a restructuring effort as well as to save on costs.
Of course, eliminating a couple of hundred corporate jobs from a company that has 1.6 million employees is fractional. The fact of the matter is that Bentonville recognizes the need to reduce expenses and alter its way of doing business as it yields fewer profits.
PreMarket Prep's Take: When it was being covered on the show Thursday, it was trading flat at $130.50. Co-host Dennis Dick expressed confusion over the recent price action after the guidance cut.
“This one is a pitch in the dirt — I am laying off it,” he said.
The author of this article interpreted the news in a more negative way, as the last two announcements from the company were not good ones. Neither host was willing to attempt to “buy the dip” in the issue until it came into the lower part of its recent trading.
It was mentioned that the issue may just find a trading range over the next few months ($120-$134) until the company can improve the fundamental outlook
WMT Price Action: Off the opening, investors attempted to shrug off the news with a slightly higher move, but Walmart immediately peaked just above the close at $130.80 and began to move lower.
As of 12:15 PM EST, the issue has easily breached Wednesday’s low ($129.86), so far falling to $127.34, and is attempting to rebound.
If the move lower continues, the next potential daily support level comes in at its July 28 low ($126.27), It should be noted that if the support is breached, the next daily low is not until its July 27 low ($121.03).
The stock was down 3.57% at $125.98 Thursday afternoon.
The Walmart discussion from Thursday’s show can be found here:
A Walmart facility in Indiana after a fire. Photo courtesy of the company.
