Walmart in Focus Amid Flipkart, Earnings Buzz

Another solid earnings showing could fuel a short squeeze for WMT stock

Feb 16, 2018 at 10:07 AM
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Retail behemoth Walmart Inc (NYSE:WMT) will step into the earnings confessional ahead of the opening bell on Tuesday, Feb. 20 -- when U.S. stocks resume trading after the long holiday weekend. In early trading today, WMT shares are in the spotlight amid reports of a bigger-than-expected footprint overseas, as well as upbeat analyst attention.

Reuters reported that Walmart is in talks to buy a more than 40% stake in India-based e-commerce company Flipkart, which would mark one of its largest overseas acquisitions. That's more than double earlier reports that the U.S. retail giant was considering a 20% Flipkart stake. Sources said due diligence will likely begin as early as next week, and a deal would give the Indian company a leg up in its battle against Amazon (AMZN).

Meanwhile, ahead of earnings next week, Jefferies and Susquehanna lifted their price targets on WMT stock, to $119 and $126, respectively. Both new targets represent uncharted territory for the shares, which peaked at a record high of $109.98 on Jan. 29, before pulling back with the broader equities market. Nevertheless, Walmart stock is down 0.9% at $102.23 today.

Although WMT shares have rallied nearly 50% in the past year, there's still plenty of room on the bullish bandwagon. More than half of the analysts following the stock maintain tepid "hold" ratings, and the average 12-month price target sits at just $108.27 -- roughly 5% from WMT's current share price. Should the blue chip report strong earnings again next week -- Walmart shares surged nearly 11% the day after the November earnings release -- a round of upgrades and additional price-target hikes could add fuel to the fire.

A short squeeze could also boost the equity. Short interest grew 18.7% in the past two reporting periods, and now represents a healthy four days' of pent-up buying demand, at WMT stock's average pace of trading.

 

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