Options Traders Storm Walmart Stock Ahead of Key Earnings Report

Walmart will report earnings before the open tomorrow, Aug. 16

Deputy Editor
Aug 16, 2021 at 1:03 PM
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Walmart Inc (NYSE:WMT) is gearing up for its fiscal third-quarter earnings report, due out before the open tomorrow, Aug. 17. Expectations are high for the big box retailer. The company, along with sector peer Target (TGT), are expected to post higher sales as back-to-school shopping gets underway amid lifting Covid-19 restrictions. The stock is climbing ahead of the event, too, last seen up 1.1% at $151.13, taking its place as one of the best performing Dow stocks this afternoon. 

Options volume is running double what's typically seen at this point, with 64,000 calls and 25,000 puts across the tape so far. The August 152.50 call is the most popular, followed by the 150 call in the same series, with positions being opened at the former. 

These traders are pricing in a 4.6% swing for WMT following tomorrow's earnings report -- slightly higher than the 2.7% move the stock has made after the event over the past two years, regardless of direction. Digging deeper, the stock has seen mostly negative post-earnings reactions, dropping lower during five out of eight of these instances. 

Despite a 13.8% year-over-year lead and solid support from its 10-day moving average (which guided it back towards its early December record peak), WMT is veering into "oversold" territory. This is per the stock's 14-day Relative Strength Index (RSI) 73, which indicates a short-term pullback could be on the horizon. 

wmt aug 16

An unwinding of pessimism in the options pits could send WMT higher, too. The stock sports a Schaeffer's put/call open interest ratio (SOIR) that stands in the 89th percentile of its 12-month range. This implies short-term options traders have rarely been more put-biased. 

Sentiment elsewhere is more optimistic, especially among the brokerage bunch. Ahead of its quarterly report, 16 analysts covering Walmart call it a "buy" or "strong buy," compared to just three "hold" ratings, and not a "sell" to be seen. The 12-month consensus price target, meanwhile, is a 9.5% premium to current levels. 

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