Supply Chain Issues Aside… Consumers Are Back for the Holidays

The week has started off with some numbers showing that consumers are spending at an increased rate going into the holiday season. And the third-quarter earnings of retailers are showing solid numbers too.

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  • WalMart (WMT) has joined in by reporting higher estimates for the fourth quarter of the year with its most recent earnings report. While shares sold off despite a beat in earnings and revenues, they may yet trend higher.

    There will still likely be some concerns over the company’s overall holiday sales as delays in the supply chain continue to keep shelves partially bare for some products.

    But with consumers spending a bit more but acting a bit wary of inflation, the retail giant is likely to be a beneficiary this holiday season.

    Action to take: Shares are slightly down over a one-year period, yet trade at 22 times forward earnings, a moderate discount to the overall market, making them a modest value play here. Shareholders can lock in a 1.5 percent dividend yield that has tended to grow over time as well.

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  • Traders might want to take advantage of the recent drop to buy a call option and bet on a move higher this holiday season. The January $150 calls, last going for around $2.20, offer high double-digit return potential or higher in the coming weeks.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.