Food inflation is hitting the United States hard. Recent metrics show that food prices are 7.4% higher than they were this time last year.

Yet, rising prices haven’t changed buying habits. And it’s not because consumers don’t know what’s happening.

According to an in-house study performed by Walmart Inc (WMT), customers are fully aware of rising prices and inflation – they see it all around them, in stores and on the news – but they aren’t buying smaller packages or downgrading to store-brand products.

This is important because it’s affecting Walmart’s bottom line.

The Arkansas-based retail giant reported stronger-than-expected fourth-quarter earnings and record U.S. revenues – all while managing supply chain disruptions, wage pressures, and inflation.

For the quarter, adjusted earnings came in at $1.53 per share, rising 4.8% from the same period last year and just ahead of the Street consensus forecast of $1.50 per share.

Group revenues for the quarter were $152.9 billion, ahead of analysts’ estimates of $151.6 billion. On top of that, U.S. same-store sales rose 6.3% from the same period a year ago, topping $100 billion for the first time on record.

Those are solid numbers, so it’s no surprise shares jumped 4.01% in Thursday’s trading. On that day, the stock closed at $138.88, which pushed shares above key support at $135.25.

With rising rates on the horizon and the ongoing threat of a Russian invasion of Ukraine, I think investors will continue to move out of riskier tech stocks and into stable mega caps with solid balance sheets, such as WMT.

I like all of that, but I want to see shares pull back just a little before targeting a WMT trade.

If shares of WMT trade back down to $136.00 by February 25, let’s buy the WMT April 14, 2022 $140/$145 Call Spread for $2.00 or less. Plan on exiting the position for a 100% profit or if shares of WMT close below $132.60.

I’m also watching Shake Shack Inc (SHAK), the New York-based fast-casual restaurant chain.

After the market’s closed on Thursday, the company reported its fourth-quarter results that included revenue and earnings of $203.3 million and a loss of $0.25 a share.

Analysts polled by FactSet expected revenue of $203 million and a loss of $0.18 a share. Basically, the company was close to expectations on the top line but had a pretty significant miss on the bottom line.

But, looking ahead, the company guided for revenue between $196 million and $201.4 million in the first quarter of 2022. Additionally, and probably most importantly, the company said it would not provide full-year guidance due to “uncertainty and resulting material economic impact” caused by the pandemic.

Traders never want to hear that a company isn’t willing to forecast what they expect will happen next, and shares dropped more than 11% in Thursday’s after-hours trading.

Before Thursday’s news, shares of SHAK had climbed up to resistance at $78.50, but as I write this, they’ve come down to $66.62, and I think they’re headed back down to test the recent lows near $60.00.

If shares of SHAK bounce back up to $70.00 by February 25, let’s buy the SHAK April 14, 2022 $65/$60 Put Spread for $2.00 or less. Plan on exiting the position for a 100% profit or if shares of SHAK close above $80.00.

Cheers,

— Shah

We Could Be Less Than 3 Months Out from an AI Superevent [sponsor]
According to one of the world's top AI scientists, there's a major event coming as soon as three months from today that could cause expensive tech stocks like Microsoft, Google, and NVIDIA to double or triple in price in the months ahead... but whatever you do, don't go all in on big tech before you have all the details. Click here.

Source: Total Wealth