The Tesco share price is attempting to crawl back after it dropped to the lowest level since November recently. The shares are trading at 225p, which is 4% from the lowest level this year. This price is 24% below 281p, which is the average forecast by analysts.
What happened: Tesco, the biggest UK supermarket company, has been under pressure lately. The company had a mixed performance lately. The shares have basically gone nowhere in the past 12 months despite the favourable environment.
In total, its revenue declined slightly to 56.5 billion pounds while its operating profit before declined by 4% to 2.5 billion pounds. Tesco is now a leading player in the UK e-commerce industry and it has exited some of its previous unprofitable areas like Poland and Asia. Indeed, in 2020, it increased its market share in groceries for the first time in four years. Also, the company has benefited from the recently-reached Brexit deal.
However, the Tesco share price has lagged. It has already dropped by almost 10% from its all-time high this year. This performance is partly because analysts expect that its strong growth will start to fade as the economy reopens. Also, the company could be left with higher costs if growth fades.
Is the Tesco share price too cheap?
The Tesco share price has been rebounding lately. It has already risen from the lowest level this year and crossed the 25-day and 50-day exponential moving averages (EMA). This is usually a bullish sign. Also, a closer look at the four-hour chart shows that the shares have formed what looks like an inverted cup and handle pattern.
Therefore, in my view, there is a possibility that the shares will break-out higher in the near term. This will be confirmed if the shares manage to move above 213p, If this happens, we should not rule out it rising to 240p. However, a drop below 223p will invalidate this prediction.
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TSCO shares chart
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