Sainsbury’s share price has been a major FTSE 100 winner in 2023 even as the UK economy goes through a recession. The stock surged to a high of 262p on Monday, the highest point since March last year. This rebound means that it has surged by more than 55% from its lowest point in 2022.
The main reason for Sainsbury’s stock surge is the rising hopes that the company will become an acquisition target. In 2021, I wrote that several private equity companies like Apollo Global Management was considering launching a bid for the second-biggest British retailer. The speculation came after another PE firm made bought Morrisons in a highly competitive bidding process. Sainsbury’s, like other UK retailers, is seen as an undervalued company.
It was revealed that Bestway, a firm that owns Costcutter, had made a 200 million pounds investment in the company. The investment, while small, was a positive catalyst for the stock since some analysts believe it could make a full buyout.
Sainsbury’s would be a nice addition to Bestway since it also owns one of the biggest wholesalers in the UK. As such, it would be similar to Tesco’s ownership of Booker. or Walmart’s ownership of Sam’s Club. In addition to Costcutter, Bestway also owns Bestway Cement and WELL Pharmacy.
However, Bestway has said that the investment will be passive, meaning that it will not seek to buy the company or make changes. Besides, unlike funds like Elliot Management, Bestway is not an activist investor that seeks to radically change how a company operates.
The SBRY share price has had a strong momentum since October last year. This recovery saw it rise above the crucial resistance level at 224.7p, the neckline of the inverted head and shoulders pattern. It was also the highest level on August 18 and December 7. Sainsbury share price has also risen above the 50% Fibonacci Retracement level at 255p.
It is also being supported by the 25-day and 50-day EMAs. Therefore, the shares have a bullish momentum, signaling that they will continue rising as buyers target the key resistance point at 300p, which is at the 78.6% Fib level.
On the flip side, a drop below 250p (January 10 high), will invalidate the bullish view and bring the possibility of it falling to the neckline at 224.7p.
The four-hour chart shows that the SBRY share price has also been in a strong upward trend in the past few weeks. As it rose, the stock moved above the crucial resistance points at 225p and 250p (December and January highs). It is also above the ascending trendline shown in green that connects the lowest points since October.
Therefore, like in the daily chart, the Sainsbury’s share price will continue rising in the coming days. This remarkable comeback could see it soar to the psychological level of 300p, which is about 13% higher than where it is today.
This post was last modified on Jan 31, 2023, 06:00 GMT 06:00