Last week, we talked about the fall of FAANG.
Since then, big tech has continued to sell off. Over the past month, the tech-heavy Nasdaq 100 has dropped over 4% as of yesterday’s close.
The S&P 500, by comparison, has only dropped 0.5%, while the Dow has risen 0.2%.
And there’s one group in particular that’s holding those indexes up while big tech drags the Nasdaq down.
Remember – the fall of FAANG means the rise of…
This week has been big for the retail sector, with earnings coming from top names like Target, Macy’s, Home Depot, and Lowes.
There was one earnings report, however, that especially caught my eye…
One of the stocks on yesterday’s Watchlist was Walmart Inc. (NYSE:WMT).
The largest company in the world by revenue, WMT is Amazon.com Inc.’s (Nasdaq:AMZN) biggest competitor – and after this week’s earnings report, the competition just got steeper.
On Tuesday, WMT reported first-quarter numbers that crushed Wall Street’s estimates: $1.69 earnings per share compared to analyst estimates of $1.21 – a 40% difference.
The retail chain has its grocery sales and strong ecommerce growth to thank. Same-store sales in the U.S. grew 6% (compared to a measly 0.9% estimate), getting a lift from grocery sales, while e-commerce sales rose by 37%.
Plus, after another round of stimulus checks, WMT also saw more online and in-person spending – the latter of which it expects to see increase as vaccination rates continue to grow.
Speaking of the future – let’s take a look at WMT’s forward guidance. Because if we’re interested in WMT in the long-term, then that’s what matters most.
According to CFO Brett Biggs, people haven’t stopped buying pandemic-popular items like bikes and printers. But they’ve started buying post-pandemic things like teeth whitener (see ya, masks), boosting sales in every group.
As a result, WMT raised its outlook for the fiscal year, expecting these numbers to increase even more. Biggs also said that this positive outlook comes from what they’ve seen so far in Q2 – a good sign for what’s to come.
I’ve said it before, and I’ll say it again: retail is on the rise.
And it seems like WMT is leading the rocket, well, to the moon, as Elon Musk would say.
WMT is pretty much AMZN’s only competitor. And the biggest source of that competition is grocery. With AMZN’s “Fresh” grocery delivery business and ownership of Whole Foods, it’s been winning that race for the past few years.
But WMT is catching up quickly – and its impressive grocery numbers just gave it a speed-boost.
How did AMZN react?
AMZN May 17-20, courtesy of StockCharts.com
Well, from Tuesday’s high, the stock dipped over 3% to Wednesday’s open.
Unsurprisingly, WMT jumped 3% at Tuesday’s opening bell after the report:
WMT May 17-20, courtesy of StockCharts.com
Today, WMT is more than 7% off its all-time high of $152.79 in November 2020. Personally, I see this retail stock breaching that level soon – meaning right now, WMT (and its options) are essentially on sale…
And prime for an asymmetric return.
I Spy Impact Money
Unusual options volume is pouring into a familiar automaker today…
I’m talking 6,500 option contracts betting that this stock is going to stay strong through the second half of the year.
Which is an interesting bet when it comes to this volatile name – one that’s not unfamiliar to regular hundred-dollar swings based on things as little as a Tweet.
Think you know the name I’m referring to?
Today’s unusual options volume is brought to you by Tesla (NASDAQ:TSLA), which was last seen up 2.7% to trade around $578.35.
The shares have shed a pretty penny since their April highs around $762, but got a lift today on hype about a Cathie Wood TSLA investment (more on that later), Elon Musk’s latest tweets on Dogecoin, and an upcoming Model S Plaid delivery event on June 3.
During TSLA’s recent fall from grace, premium on put options increased, and it seems one institutional trader may be trying to take advantage of that today, selling to open 6,500 deep out-of-the-money 120-strike put options expiring in January 2022. By doing that, they’re betting TSLA stays above $120 through the second half of the year.
Click To Enlarge
TSLA LEAPS action today – courtesy of Trade-Alert
Because I’m looking for attention on both the institutional and retail side, to give me that two-factor authentication, I’ll continue to watch these big trades in the option pit.
- Advanced Micro Devices Inc. (Nasdaq:AMD): $77.32 (+1.43%)
Big money is pouring into this semiconductor company:
And you know what that means? AMD is about to be two-factor authenticated, making it the perfect candidate for an asymmetric return.
- Alibaba Group Holding Ltd. (NYSE:BABA): $215.92 (+1.59%)
BABA is sinking… but so is the stock’s volatility. Remember what I said about the relationship between the VIX and the S&P? In a healthy market, they move inversely of one another. Well, the same goes for individual stocks. So, when both the stock and volatility are sinking, that’s not a good sign for the stock… but it could be a good sign for a potential bearish strategy, which is why I’m watching “the Amazon of China.”
- AT&T Inc. (NYSE:T): $29.53 (+1.97%)
This week, I walked you through T’s new merger deal with Discovery. And I told you this was going to be a bullish move for the stock… long-term. This week, T has been sinking on the news. But I think it’s done dying. Volume is high, and IV is trending lower. People still want to own T thanks to its high dividend – and I expect the telecom to turn higher in the coming months.
- ARK Innovation ETF (NYSEARCA:ARKK): $106.48 (+3.41%)
You guys know how I feel about ARKK. Cathie Wood’s ETF is essentially a pile of junk – Zoom, Coinbase, Tesla – it’s practically a group of stocks I’d love to short. But instead of shorting them individually, why not do it altogether? ARKK may be up today, but I expect it to underperform the Invesco QQQ Trust (Nasdaq:QQQ) for the rest of the year – putting ARKK at the top of my bearish candidates.
I can’t wait to read what you all have to say.
May 20 2021