Sign InWalmart Stock Faces Volatility: Technical and Fundamental Analysis Suggests Caution Ahead
Summary
As of February 20, 2025, Walmart Inc.'s stock (WMT) faced a notable decline of 6.53% to close at $97.21, with analysts suggesting a 'Hold' stance due to high valuation concerns despite long-term stability prospects amidst recent earnings forecast pressures.
Technical Analysis
Walmart Inc.’s stock (WMT) closed at $97.21 on February 20, 2025, after a significant decline of 6.53% (-$6.79). It traded between a low of $96.68 and a high of $100.10, indicating volatility amid investor reactions to the company's latest earnings forecast. The stock's Relative Strength Index (RSI14) is 46, suggesting that although it is closer to oversold conditions, it is not in the oversold territory yet.
The stock price is currently above its 50-day moving average of $95.67 and well above the 200-day average of $79.93, providing a signal of upward momentum in the medium to long-term perspective. However, the price drop has brought it very close to the established resistance level at $97.40, which may now act as a support providing some stability. The Average True Range (ATR) of 2.09 points to potential continued volatility. The MACD (3-month) at 4.29 shows continued positive momentum, albeit it requires monitoring due to recent price movement.
Fundamental Analysis
Fundamentally, Walmart's Price-to-Earnings (P/E) ratio stands at 40.17, which reflects a relatively high valuation compared to wider sector averages, suggesting overvaluation. This is further underscored by the Discounted Cash Flow (DCF) calculation of $40.49 indicating a significant overvaluation relative to the intrinsic value. Walmart's robust market cap of $780.93 billion secures its place as a behemoth in the retail sector.
Despite expectations of slowing profit growth according to its recent earnings announcement, the company's consistent sales increase provides a foundation for stability. Analysts’ consensus leans towards a 'Buy', with target prices ranging between $90 and $113. This indicates potential upside, though high variability concerns remain with the median target at $95.50.
Short-term Prediction
Given the substantial decline post-earnings and today's fresh concerns over profit forecasts, the stock might test the newly formed support level at $97.40 in the next trading day. The heightened volume of 55.29 million, against an average of 17.18 million, signals intense trading interest which could lead to short-term recovery attempts. Over the next week, the negative sentiment due to profit forecasts could lead to sustained pressure on the stock, potentially opening doors to test lower levels near $92.24 support.
Intrinsic Value and Long-term Investment Potential
Walmart's intrinsic value, as per the DCF analysis, is significantly lower than the current trading price. Despite the decrease in forecasted profits, Walmart's extensive market infrastructure and sales growth offer long-term potential. However, with its current high P/E ratio and overvaluation correlations, considerable caution is warranted. Long-term investors may find value if prices stabilize post-correction, aligning closer to intrinsic values.
Overall Evaluation
Categorizing Walmart stock, current market conditions position it as a 'Hold'. While there's substantial potential for long-term gains due to its market-leading status and sales growth stability, current valuation concerns and the recent earnings forecast-driven drop necessitate caution. For investors considering new positions, monitoring subsequent market reactions and performance towards target support levels is crucial.
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