Tesco Share Price Nears the 100-Day EMA. Time to Collect?

The Tesco share price tumbled by more than 2% on Monday as a sea of red engulfed European stocks. The stock ended the day at 287p, the lowest point since January 25th this year. It has crashed by more than 5% from its year-to-date high. Tesco has a market cap of over 22 billion pounds.

Why has Tesco shares gone up? 

Tesco is the biggest retail company in the UK. The firm operates its large grocery stores across the country. It has also diversified its business by investing in gas stations and bank operations. The Tesco stock price has done exceptionally well in the past few months. The shares have climbed by about 42% from their lowest level in September 2020. As a result, its total market cap has soared to over 22 billion pounds. 

There are three main reasons why the stock has done well. First, the company has used its size to weather the supply chain disruption storm. As a result, Tesco reported revenues of over 53.4 billion pounds in 2021, which was an increase from the previous year’s increase of 49 billion pounds. 

Tesco earnings
Tesco earnings dashboard

Second, Tesco’s management announced measures to boost the share price. They announced a share repurchase program worth about 686 million pounds in October. In addition, it paid its last dividend in November, and analysts expect that it will boost its payouts this year. 

Third, the Tesco share price performed well because of the ongoing interest of UK retailers by foreign investors. Some of the retailers that have been bought recently are Morrison’s and Asda. And there have been rumours that Apollo and other PE firms were considering placing a bid on Sainsbury’s. Therefore, TSCO has risen by association, although most analysts believe that a bid will not be made because of its size.

Other reasons that explain the performance of the Tesco share price are the strong retail sales, its positioning in e-commerce, and the BOE rate hikes that will benefit its banking division. 

Is Tesco stock a good buy? 

Most analysts believe that Tesco is a good value stock for investors to a large extent. This explains why the median estimate of the share price is about 320p. Some of those who are optimistic are Shore Capital, Barclays, Berenberg, JP Morgan, and Citigroup. 

Some of the potential catalysts for the Tesco share price will be the ongoing recovery of the UK economy now that the government has ended its Covid mandates. Also, it will benefit as supply chain disruptions ease in the coming months. Therefore, stable growth and rising investor payouts make Tesco a potentially good buy among long-term investors. 

Tesco share price forecast 

The daily chart shows that the Tesco share price has been in a bullish trend in the past few months. However, a closer look shows that the upward trend may have peaked now that it has moved slightly below the 50-day moving average. Nevertheless, it remains solidly above the 100-day moving average. 

Therefore, in my view, the bullish trend will remain as long as the stock is above the 100-day EMA. If it breaks that support, it will mean that bears have prevailed, which will open the possibility of the stock falling to about 250p.

teso share price