The Tesco share price has struggled for direction in the past few weeks. The shares are trading at 228p, which is slightly higher than this week’s low of 223p. Year-to-date, the stock has dropped by about 3%, underperforming the FTSE 100 that has risen by more than 7%.
What happened: The Tesco stock has lagged the market this year even after the company published strong quarterly results. The company recorded strong annual revenue and expanded market share as customers bought more during the pandemic. However, investors were disappointed with the company’s profitability and forward guidance since this growth came at a cost.
Tesco will be in the spotlight next week as the company publishes its first-quarter trading update. Analysts expect another solid quarter as the lockdowns pushed people to buy more items. Analysts will be watching at the company’s costs and impacts of the supply disruptions and higher costs of items as inflation rises. Also, they will be looking at the strength of its e-commerce business and the performance of its banking operations. In a note, an analyst said:
“Tesco’s experience at helping feed the nation at a time of crisis and its investment in online ordering infrastructure should help it stay resilient in the face of continued uncertainty.’’
Some analysts believe that the recent performance of the company makes it a good contrarian buy. In a note last week, analysts at JP Morgan made the case that European stocks seem more attractive than those in the US. While the report did not cite Tesco, its valuation remains better than that of peer American companies.
The daily chart shows that the TSCO stock has been in a tight range in the past few weeks. The stock is trading at a slightly higher level than the 50% Fibonacci retracement level. It also seems to be forming a symmetrical triangle pattern that is shown in blue. It is also slightly above the 25-day and 50-day moving average. Therefore, in my view, this stock will remain in a consolidation phase for longer since the triangle pattern is not yet at its confluence zone.
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