Top Pick Tuesdays – Walmart Inc.

Walmart Inc. (WMT:NYSE)
Price at Preparation: $59.60 (Feb 26th, 2024)

What they do

Walmart Inc. (WMT:NYSE) is a technology-powered omni-channel retailer. The Company provides the opportunity to shop in both retail stores and through e-commerce and to access it’s other service offerings. It offers an assortment of merchandise and services at everyday low prices. It operates through three segments: Walmart U.S., Walmart International and Sam’s Club. Walmart U.S.: a mass merchandiser of consumer products, operating under the Walmart and Walmart Neighborhood Market brands, as well as walmart.com and other e-commerce brands. Walmart International: includes various formats divided into two categories: retail and wholesale. These categories consist of many formats, including supercenters, supermarkets, hypermarkets, warehouse clubs (including Sam’s Clubs) and cash & carry, as well as e-commerce through walmart.com.mx, walmart.ca, flipkart.com, walmart.cn and other sites. Sam’s Club: a membership-only warehouse club that also operates through samsclub.com.

At Theta Bandits, we’re constantly searching to add assets with great potential for a nice return. Today’s pick is Walmart (WMT) and is a little special because it’s slogan “Everyday low prices” DOES NOT apply to it’s stock price. However, we’ve identified a potential plan to get us in the game, so let’s get to it.

Walmart is a stock that is widely considered a litmus test for the economy due to much of their customer base. Currently, the stock is trading at 52-week highs after a beat on their Q4 earnings and they also announced a 3:1 stock split to take place on Feb 26th, 2024 – which effectively sees their stock price divided by 3, but for each share that someone owns, they will now own 3. With the stock price slashed, this offers a great opportunity to start a position, but keep in mind, when both Alphabet (GOOG) and Amazon (AMZN) split their price, the stock retraced downward before recovering. With an average 12-month price target (PT) of $64.95 USD (8.98%) and a maximum of $76.00 USD (27.52%), there is a decent runway for profit on current prices. If only there was a way to squeeze a little more out of this price action?

Plan

As always, follow along with the visual guide below. We have provided a 1-year history of the stock’s price action. The diagram shows that WMT has had a great year trending upwards, with a few bumps along the way, notably the gap down with Q3 2023 earnings, which they completely recovered plus interest! As mentioned above, after a company split, we usually have some price volatility, coupled with dividends being paid out soon patience could potentially be rewarded. Looking at the support lines to the downside from the current price, we identified a few points of $58.50, $56,78, $54.48, $52.97 and $51.31 with the ideal price range highlighted in yellow around the $52.97 marker. One method could be to set alerts and purchase shares in chunks and dollar cost average (DCA) down until a full position is purchased. Once purchased, it is prudent to scale out the same way securing profits along the way upward while increasing the potential profit on the trade.

For more content consider our Theta Bandits Discord community, a hub for traders to ask questions, share ideas and strategies for various tickers daily. Traders in this community could potentially attack purchasing this position using other methods discussed in previous Top Pick Tuesdays. Since a downward movement has a high probability of occurring, selling a cash-secured put (CSP) option would allow a purchase of the stock (block of 100 shares per contract) at a set price and date. While this method pays you a premium to wait, this also potentially lowers the cost basis of the final share purchase. This method can be more capital intensive, so do not jump into this method without consulting your financial advisor.

RISKS

WMT is at a 52-week high and while this could keep going up, there is a high probability of the stock price coming down in the short term. In the sections above we have outlined methods for both conservative and more aggressive ways to attack this trade. Make sure to give your trade the time it needs to be successful, while setting and updating limits to mitigate risks and exit points for the position if necessary.

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.

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