Wal-Mart is having its best year since 1999, and it's about to get a lot better, according to one market watcher.
Shares of the big-box retailer have surged more than 30 percent in 2017, putting it on pace for its best annual performance in nearly three decades. This is happening as the broader retail ETF, the XRT, tracks for its worst year since 2008. And as the company gears up for earnings later this week, Stacey Gilbert, head of derivatives strategy at Susquehanna, says that not only is the Wal-Mart still worth buying, it is her firm's favorite stock in the space.
"From a trading sentiment heading into earnings, it's an implied move of around 4 percent," she said Friday on CNBC's "Power Lunch." "Nothing crazy, but the sentiment is really suggesting that there isn't expected to be anything crazy mentioned and downside is likely limited."
Gilbert believes the company's fundamentals will continue to improve. "Management has done a great job of balancing the growth of earnings as well as all of the investments needed to let it continue to be a premium U.S. leading omnichannel retailer," she added.
Wal-Mart hit another all-time high on Monday, as the retailer upped prices for some online items in an effort to compete with Amazon. But Cowen's head of sales trading, David Seaburg, believes that the online presence Wal-Mart is trying to build for itself is actually the company's biggest headwind.
"They are investing [in their e-commerce business] and talking about it loudly," he said on "Power Lunch." "The reality is it's going to take a lot of investment to get this to a $100 billion e-commerce business versus a $26, $27 billion e-commerce business."
Furthermore, the increased competition in the grocery space thanks to Amazon's Whole Foods acquisition could also hurt the big box giant's margins, according to Seaburg. Thanks to the "gross margin risk, I wouldn't be buying Wal-Mart, I'd be a seller here," he said.
Wal-Mart reports earnings Thursday morning. Analysts polled by FactSet expect the company to earn 97 cents per share on $121 billion in revenue.