Analyst: Walmart Entering "Era of Amplified Earnings Growth"

Calls are popular in the options pits

Assistant Editor
Jun 22, 2020 at 11:16 AM
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The shares of Walmart Inc (NYSE:WMT) are up 1.3% at $121.38 at last check, after an upgrade from UBS to "buy" from "neutral." The firm cited a period of "amplified earnings growth" thanks to an "enhanced productivity loop, increased eCommerce scale, and accelerated technology deployment." UBS also tacked on a price-target hike to $135 from $130, and Guggenheim chimed in $5 more dollars as well, upping its own target to $145 from $140. 

Despite bull notes, WMT's 20-day moving average is keeping a cap on gains today. However, former pressure at shares' year-to-date breakeven has emerged as support this past month. Up 5.7% in the last three months, the stock is fresh off a weekly gain of 2.1% -- the first weekly win in the last five sessions. 

Today's bullish analyst attention runs true to the broader setup, with 18 of 24 sporting a "buy" or better, five at a tepid "hold," and only one at a "strong sell." Meanwhile, short interest has fallen 11.8% during the last two reporting periods to make up 13.5 million shares, and now sits at a slim 1% of the stock's available float. 

In the options pits, Walmart stock's 50-day call/put volume ratio of 3.60 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 98% of readings in its annual range. In other words, long calls are being picked up at a much quicker-than-usual rate. 

Echoing this, WMT's Schaeffer's put/call open interest ratio (SOIR) of 0.49 sits in the low 6th percentile of other readings from the 12 months. This suggests short-term option players have rarely been more call-biased in the past 12 months.

Options are certainly an attractive route at the moment. That's because the stock's Schaeffer's Volatility Index (SVI) of 22% stands higher than just 15% of all other annual readings. This means that options players are pricing in relatively low volatility expectations at the moment. 

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