Walmart (NASDAQ:WMT) stock has soared and hit a crucial resistance as traders position for the upcoming quarterly earnings. It closed at $131.45 last week, a few points below the important point at $133.90.

Walmart Stock Faces Valuation Headwinds Ahead of Earnings

WMT shares have done well over time, rising by 180% in the last five years and by 40% in the last 12 months. This surge happened as the company continued to grow its market share in the retail sector in the US.

It has also made it one of the most expensive retailers to own in Wall Street. Data shows that the company trades at a price-to-earnings ratio of 45, higher than its five-year average of 31.

This metric is also much higher than the retail sector, with the SPDR S&P Retail ETF (NYSE:XRT) having a multiple of 13.80. It is also higher than the S&P 500 Index average of 23. 

Most notably, Walmart is now more expensive than high-flying technology names. The Nasdaq 100 Index has a multiple of 36. NVIDIA (NASDAQ:NVDA), whose revenue is growing at over 70% annually, has a price-to-earnings ratio of 25. 

These valuation concerns will linger when Walmart publishes its results on Thursday this week. Wall Street expects its first-quarter revenue to come in at $174 billion, up by 6.58%. The earnings per share are expected to jump by 8.20% to 66 cents.

Walmart has taken some measures to boost its earnings growth as inflation jumps. For example, the management recently slashed hundreds of corporate jobs as it integrated artificial intelligence tools to its operations. 

At the same, the company is set to benefit from the ongoing economic uncertainty. In a recent note, Bank of America's Christopher Nardone argued that Walmart tends to see more customers whe inflation is rising. That's because of the perception that its products are usually cheaper than other retailers. 

WMT Stock Has Formed A Double-Top Pattern 

In addition to valuation risks, Walmart shares will face technical risks when it releases its earnings this week. It formed a double-top pattern at $133.90 and the neckline at $117.98, its lowest point this year. A double-top is one of the most common bearish reversal signs in technical analysis.

Walmart stock chart | Source: TradingView

This pattern, therefore, points to a pullback when it publishes its results this week. If this happens, the next key target will be the neckline at $117.98.

However, a strong "beat and raise" will invalidate the bearish outlook and possibly push it to the Walmart stock analysts’ forecast of $134.40.

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