Some shareholders may have gotten upset with Walmart's (NYSE:WMT) management at its 22nd annual investors meeting, held on the 20th of October. The company, late in the game it seems, has decided to really invest in the online channel. This coupled with a stronger dollar, higher US wages and deflationary trends across its food segments all point to lower earnings right up until 2019 despite revenues predicted to grow in the interim period.

Walmart earnings Q3 2016 are expected to come in at $0.98 per share on revenues of $117.88 billion compared to an EPS of $1.15 on $119 billion for the same quarter 12 months ago. Investors have turned bearish on this stock but maybe a tad unfairly, especially when you look at the financials. Why? Because Wal-Mart feels that its online channel will grow rapidly (already growing between 20 to 30%) over the next few years despite probably being in the red until 2018.

The obvious advantage the company has here over online retailers are the stores and fulfillment centers (5000 stores and 150 fulfillment centers in the US alone) it runs. Apart from the obvious brick and mortar advantage of its business model, I just feel that this retailer may surprise investors in the quarters to come when it announces earnings for a variety of reasons. Why?

Firstly, let's take a look back at the company's numbers in the last quarter. The company beat on revenues but missed on the bottom line ($1.08 EPS reported compared to the predicted $1.12). As a result of the earnings miss, the stock sold off by more than 3% but unfortunately the losses were compounded the day after (19th August) when the S&P500 lost 150 handles. The S&P500 has since recovered but Wal-Mart has not. Then we had the annual investors meeting on the 20th of October last when management reported that earnings would be stifled until 2019 which again tanked the share price. So all of the above has meant that the stock is down almost 20% in price since the 18th of August (see chart).

Source: Walmart stock price data by amigobulls.com

From my calculations, the expected move for 3Q 2016 earnings is about $2 but I think the stock will probably not drop this much even if it reports an earnings miss. The announcement last month when the stock dropped more than $6 a share illustrates to me that a good majority of sluggish earnings is already priced into the stock. Furthermore when you look at the dollar index, the dollar on average seems to be weaker in the third quarter - especially September when it hovered around the 95 level. In April of this year for example, the index touched 100 which really impacted international sales. Bears not only point to the fact of the strong dollar but also to markets such as China, Brazil and the UK where the retailing giant is slowly losing market share to home grown rivals and German discount retailers (Aldi & Lidl which will soon have a larger presence in the US also).

Nevertheless, what investors need to consider here is that Wal-Mart's grocery arm is definitely caught in a deflationary spiral which is hurting margins. This is evident in North America where the company is bullish on its prospects due to higher incomes and higher per capita spending. History has shown us that inflation always follows sustained periods of deflation. The commodity collapse since 2011 has created a price war among major retailers which has really hurt Wal-Mart's grocery division (due to cheaper prices and margins) as this is the retailer's biggest division, by far. However management's guidance up to 2019 is based off current prices and current conditions which may provide an opportunity for value investors if soft commodities can undergo some inflation and the dollar can weaken from here.

On the e-commerce side, Wal-Mart hit $12.2 billion in sales in fiscal 2015 which was a 22% increase compared to fiscal 2014.  Again Wal-Mart may be playing down the potential of its digital arm when it states that because of elevated investment, this division will remain unprofitable until 2019. In my opinion, there are too many "unknowns" in this area that could provide an opportunity for investors. Firstly the company has over 7 million products for purchase presently on its website but this number is expected to be scaled to the tens of million in the next few years. Secondly, the company will launch its online presence in more markets going forward which again in my opinion could provide huge upside. Why? Well as many shoppers in the US have cars, providing an online service may not appeal to the masses there as customers can usually come to the stores. However, there are many markets where customers will want goods delivered and this is where Wal-Mart could take back market share from competitors as it will also have a physical presence in this market. I just think there could be exponential growth in the e-commerce channel as online shopping is definitely the growing trend. Online sales still only make up 7% of total retail sales although it is in the growth stage. WalMart can definitely create synergy between its online channel and physical stores which its competitors simply can not do. This has to stand the company in good stead going forward.

To sum up, I believe WalMart will not fall much from here due to future earnings sluggishness already being priced into the stock. Apart from Walmart stock trading at a historic low P/E ratio of 12.27, the balance sheet looks very strong with shareholders equity (assets - liabilities) still $30 billion ahead of the company's debt load. I'm convinced this company has the financial muscle and staying power to see these investments through and positive changes may come sooner than many bears think..