Walmart Earnings: Options Market Sees Bearish Skew Ahead

Walmart shares are rising ahead of its fiscal Q2 earnings release on August 20. The consensus is for Walmart to post $0.73 in EPS, a 7.35% increase from last year.

However, the options market does not believe a near-term recovery is likely after the earnings event. According to Barchart, the put-to-call ratio is 1.56x, indicating a strong bearish skew, and the lower price on those contracts is set at $110.54, suggesting WMT shares may sink as much as 4.28% immediately after.

Investors are advised to exercise caution when playing Walmart due to its high valuation of nearly 40x forward earnings, making it expensive compared to AI stocks like Nvidia (NVDA).

On the other hand, Bernstein's senior analyst Zhihan Ma recommends buying the pullback in WMT shares. She believes Walmart remains a strong fundamental position despite the near-term noise.