Walmart's Stock Plummets Amid Fuel Costs and Guidance Concerns

Walmart's stock price plummeted nearly 10% in just one week, despite beating earnings expectations and raising its full-year sales guidance. The retail giant reported $187.94 billion in revenue, a 5.94% increase, with adjusted EPS of $0.81, exceeding the estimated $0.7413. However, its shares fell to $103.70.

Michael Zakkour, CEO of 5 New Digital, attributed the selloff to sentiment rather than fundamentals, stating that consumers are becoming more choosy about where they spend and how they spend it. He believes Walmart, along with Target and Home Depot, will benefit from this shift during the holiday season.

However, not everyone is convinced. The drawdown is largely due to Walmart's guidance for Q3 EPS between 62 and 64 cents, as well as $2 billion in surprise fuel costs. This has led some to question whether Walmart can justify its current multiple and rising capex with share gains.

The key will be the rollback data, which shows that Walmart U.S. had over 11,000 rollbacks in the quarter, up from 7,200 at the end of Q1. If these price cuts produce durable share gains, Q4 comps are expected to accelerate above the Q3 guide.