Walmart stock dropped nine percent because the company told Wall Street what it plans to do next quarter. Investors had different plans. They lost.
The earnings report comes out Thursday. The stock already fell. This makes perfect sense if you've ever met a portfolio manager who thinks he can predict grocery margins during a K-shaped recovery. He cannot. He just bought at the top and needs someone to blame.
The K-shaped economy means rich people buy more organic kale while poor people switch from name-brand cereal to the bag stuff. Walmart sells both. Wall Street wanted Walmart to sell only to the top half of the K. Walmart said no, we also serve people who need to buy socks and motor oil at 2 AM. The analysts wrote SELL in their Bloomberg terminals and went to lunch.
Retail traders saw the dip and bought calls expiring Friday. They now understand the difference between a value play and a mistake. The difference is about nine percent, minus theta decay, minus the spread, minus their self-respect.
The outlook disappointed Wall Street. This phrase means a company told the truth about future revenue and a man wearing Patagonia over a dress shirt decided that truth was insufficient. He has a price target. He will defend that price target until his bonus depends on changing it.
Walmart will report Thursday. The stock will move. Analysts will explain why they saw it coming. They did not see it coming. They saw the stock price change and then remembered they had opinions about retail margins. This is called technical analysis in some circles. In other circles it is called making shit up.
The consumer remains strong, according to people who need the consumer to remain strong. Walmart serves that consumer. The stock fell anyway. Turns out the consumer's strength matters less than whether Todd from Morgan Stanley got his numbers right.
He did not get his numbers right.
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