Tesco Share Price as Inflation Continues to Bite

Summary:

Tesco's share price showed great performance in July, closing the markets up 2 per cent, despite the previous five months being bearish.

Tesco’s share price showed great performance in July, closing the markets up 2 per cent, despite the previous five months being bearish. In August, Tesco’s price is continuing with the bullish trend and is already showing signs of what is likely to come.

Despite today’s trading session going down by over a percentage point, there are many reasons to believe that the share price will continue improving after opening the month on a strong and aggressive bull move. For starters, part of the reason why Tesco has struggled in the past few weeks is the rising cost of living.

In the UK, the latest consumer price index was 9.4 per cent. Such a huge inflation rate has resulted in most consumers in the UK cutting their spending. As a result, the cost of operations has also gone up. The high inflation rate has also hit the UK consumer’s discretionary spending, which is a backbone of the sales and revenue they make for most retail stores. The long-term impact of the rising cost of living is also likely to see Tesco taking a hit on its bottom line. Alternatively, should they pass the buck to consumers, they are likely to also take a hit in the value of sales.

Despite today’s price drop of a percentage point, my Tesco share price prediction is still to the upside. My analysis is based on previous price action that has seen the company going up in the stock market for the month of July, despite recording a 33 per cent loss year-to-date and being on a five-month losing streak.

In my opinion, despite the latest data showing a high inflation rate and tough economic environment, I expect Tesco to continue thriving. There is a high likelihood that the company will see huge revenues in the current quarter, possibly even profits. However, would the prices fall and trade below last week’s price low of 257p, then my analysis of bullish will be invalidated. It will also mean a likely move to the downside.