Can the Hut Group’s share price (THG) build on its 110% year-to-date gains?
Fundamental and technical analysis of The Hut Group (THG) and its share price.
The Hut Group (THG) on track for neutral cash flow
The Hut Group (THG) shows promising progress in the second quarter (Q2), with strong earnings before interest, taxes, depreciation, and amortization (EBITDA), and cash flow (around £90 million outflow in the first half of the year). This suggests that the company is on track to achieve its goal of neutral cash flow by 2023, and possibly positive cash flow by 2024.
The company's high profitability is likely due to their Nutrition sector, as whey prices have dropped by 55% since their peak in April 2022 and the company's decision to keep prices low has kept demand steady. The company is also expected to see further profit increases in the second half of the year due to shorter purchasing cycles compared to competitors and decreasing commodity prices.
The company's Beauty and Ingenuity sectors will be closely watched, as they are expected to take longer to recover. The second half of the year may be more challenging for these sectors as economic data suggests that consumer spending will be weaker.
The Hut Group analyst ratings, price targets and sentiment
Refinitiv data shows a consensus analyst rating of between ‘buy’ and ‘hold’ for THG which is expected to publish its first-half results on 14 September 2023. Analysts show 3 strong buys, 1 buy, 4 hold, 1 sell and 1 strong sell - with the median of estimates suggesting a long-term price target of 84.00p for the share, roughly 14% lower than the current price (as of 5 September 2023).
IG sentiment data shows that 99% of clients with open positions on the share (as of 5 September 2023) expect the price to rise over the near term, while only 1% of clients expect the price to fall. Trading activity over this week and month shows 56% and 62% of sells, though.
The Hut Group technical view
The THG share price has done very well year-to-date with it rising by around 110% despite its July-to-August 20% correction and trading around the 98 pence mark.
The strong rally has to be seen within the context of the company’s overall share price which has dropped by around 96% from its 837.80p January 2021 lofty heights, though.
The Hut Group Weekly Candlestick Chart
Provided that the THG share price manages to stay above its August low at 83.80p, the recent 15% advance is likely to continue with the July and August peaks at 110.25p representing the first technical upside target.
Once these highs have been overcome, the May peak at 118.10p is expected to be targeted.
Minor support can be seen along the 55-day simple moving average (SMA) at 93.42p and the May-to-September uptrend line at 88.50p.
The Hut Group Daily Candlestick Chart
Only a fall through last month’s low at 83.80p could throw a spanner in the works for the bulls with the 200-day SMA at 72.00p being eyed in such a scenario.
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