- Summary:
- What is the outlook of the Card Factory share price after the relentless comeback? I explain why it is now facing technical headwinds
Card Factory (LON: CARD) share price has emerged as one of the best-performing mid-cap stock in the FTSE 250 index. Its stock jumped to a high of 97.2p on Friday last week, the highest point since May 2021. Its bull run started when the stock slumped to an all-time low of 22.1p. The company is now valued at over 308 million pounds. It has also outperformed the FTSE 100 and FTSE 250 indices.
Strong momentum in gifting
Card Factory has been a bright shining star in the troubled UK retail industry. As data published by the Office of National Statistics (ONS) showed last week, the country’s retail sales dropped sharply in December. This happened as the British inflation remained closer to its highest level on record.
Card Factory published an exciting trading statement early this month. Its total sales jumped from £337.3 million in 2021 to over 432.6 million in 2022. This recovery happened even as the company was forced to slightly increase prices of its products. Same store sales rose by 7%, helped by the strong performance of its Christmas cards.
Card Factory seems undervalued considering that it has a net debt of just £46 million. It is also trading at an EBITDA to market cap of just 3x, which is relatively cheap. Also, its omnichannel business model is working well as e-commerce sales jump. The firm said:
“We are hedged on energy costs until September 2024 and have a currency hedge in place for the majority of our FY24 requirements at rates favourable to the current market.”
Card Factory share price forecast
CARD share price made a spectacular comeback in 2022 even as well-known brands in the retail industry like Boohoo, Asos, and Tesco crashed. The shares rose above key resistance levels during the year. The most recent important resistance level it crossed was 67.7p, which was the highest point on May 20 last year. This rally happened after the shares made a triple-bottom pattern at 39.5p.
Card Factory’s stock is also being supported by the 50-day VWMA while the Relative Strength Index (RSI) has formed a bearish divergence pattern. Therefore, while there could be more upside, I am inclined to predict that a pullback will happen in the coming weeks. If this view is accurate, the stock will likely drop to about 67.7p, which is about 25% below the current level.
On the flip side, a successful rebound above the year-to-date high of 96.9p will invalidate the bearish outlook for the stock.
