Taylor Wimpey share price is in a freefall: will it recover?

Taylor Wimpey share price continued its relentless freefall, reaching its lowest level July 2023, down by over 46% from its since July 2023. It has plunged by over 45% from its highest point in October 2024, erasing billions of dollars in value. This crash may continue in the foreseeable future after releasing mixed results.

Taylor Wimpey’s business is facing major headwinds 

UK housebuilders are among the worst-performers in the London Stock Exchange (LSE) this year as they face a double-whammy of slow demand and high costs.

A report released its trading statement, which showed that its business is struggling as mortgage rates remain at an elevated level.

The statement said that its total order book stood at over £2.22 billion, much lower than £2.3 billion in the same period last year. At the same time, house prices dropped by 1%, with the New South Wales region being the most affected.

The company is also seeing higher costs as energy costs jump. It is experiencing build cost inflation of low to mid single digits. The management added:

“We continue to be highly focused on the operational levers under our control, including driving sales performance, tightly controlling land and WIP spend and mitigating cost where possible.”

Taylor Wimpey’s business will likely remain under pressure in the foreseeable future as the Iran war is not ending any time soon. One major cost is the rising fuel prices, which will affect its transport costs. Other building materials will also continue rising as the war continues.

At the same time, this increase will lead to higher inflation. Indeed, a recent report showed that the headline Consumer Price Index (CPI) jumped to 3.3%, moving further away from the Bank of England (BoE) target of 2.0%. 

As a result, there is a risk that the BoE will maintain a more hawkish tone in the coming meetings. Higher interest rates mean that mortgage rates will remain between 4% and 5% in the foreseeable future, hurting its demand.

On the positive side, Taylor Wimpey continues to pay dividends despite the ongoing challenges. It is also repurchasing its stock, completing the initial purchase of shares worth £34.9 million. This buyback is part of the £52 million authorization.

Taylor Wimpey share price technical analysis 

TW stock chart | Source: TradingView 

The weekly timeframe chart shows that the TW stock has crashed and is now hovering at its lowest level in years. It has crashed below the key support at 85.35p, its lowest level in September last year and the neckline of the double-top pattern.

The stock has moved below the 61.8% Fibonacci Retracement level and is nearing the 78.6%. It has also dropped below all moving averages, a sign that bears remain in control.

The Average Directional Index (ADX) has jumped to nearly 30, a sign that the bearish momentum is continuing. Therefore, the most likely scenario is where the stock continues falling as it continues to lack a clear catalyst. If this happens, the next key target to watch will be at 70p.