Walmart Stock Nears Key Support After Earnings Miss

Walmart Inc. (WMT) shares have fallen more than 12% since the beginning of the week after the company reported worse-than-expected fourth quarter financial results. Revenue rose 4.1% to $136.3 billion – beating consensus estimates by $1.39 billion – but earnings per share hit only $1.33 and missed consensus estimates by four cents per share. The company's full-year profit guidance also came in at $4.75 to $5.00 per share, below expectations of $5.13 per share.

Aside from the lackluster guidance, the company's e-commerce growth came in at just 23%, which was sharply lower than the growth of roughly 40% seen in past quarters. Management primarily attributed the slower growth to the Jet.com acquisition that added scale but anticipates the growth rate to ramp back up to the 40% range after the first quarter. Full-year e-commerce sales remain up 44% versus the prior year. (See also: Walmart Sellers in Control After Earnings Miss.)

From a technical standpoint, the stock broke down from trendline support earlier this month, rebounded to the pivot point and fell again to key support levels. The relative strength index (RSI) appears oversold at 31.71, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These two technical indicators suggest that the stock could see some consolidation and a possible move even lower if the trend reverses in the longer term.

Traders should watch for some consolidation above trendline support levels after closing the gap dating back to mid-November. If the stock breaks down from these levels, it could reach the 200-day moving average at around $86.21 or reaction lows at around $77.50. If the stock rebounds, traders should watch for a move to S1 support and the 50-day moving average at around $100.00 on the upside. (For more, see: Why Walmart Will Never Be Amazon.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.