This Stock Has Exploded 25% On Profits Rise Amid Coronavirus Panic Buying

This Stock Has Exploded 25% On Profits Rise Amid Coronavirus Panic Buying
  • Morrisons reports a 3% rise in pre-tax profit for the full-year
  • The grocer plans to add 3,500 staff to help meet a surge in demand for delivery services
  • Morrisons still plans to open 5 new stories during 2020/21

The coronavirus outbreak has initiated stockpiling of groceries worldwide. Goods like toilet paper, canned food, and water are seen as essentials as people race to stores in a panic buying mode.

Therefore, it’s not a surprise that the long queues in supermarkets have contributed to the rise in profits, despite the bloodbath in stock markets that saw some stocks hit multi-decade lows on lower demand and “stay-at-home” policy.

Fundamental analysis: Goods stockpiling boosts Morrisons’ pre-tax profit figures

Shares of Morrisons (LON:MRW), the fourth largest chain of supermarkets in the United Kingdom, trade around 25% higher in the last two days after the company posted a profit rise, as well as saying it needs to add 3,500 workers to respond to the increase in demand.

The Bradford-based supermarket chain said its pre-tax profit rose 3% to £408 million for the year ending February 2, despite a 1.1% drop in sales to £17.5 billion. During the first six weeks of this year, like-for-like sales increased by 5%.

“We are currently facing unprecedented challenges and uncertainty dealing with COVID-19. Looking after our colleagues and customers is our priority, ensuring that we have a clean, safe place to shop and work”, Morrisons chair Andrew Higginson and chief executive David Potts said.

Morrisons expanded the list of locations where it is possible to pick up goods purchased through online delivery to more than a 100 stores. The grocer will also increase delivery service by 60% to meet the surge in demand.

However, Potts warns that stockpiling will lead to strains in the supply chain.

“If we just buy what we need then there will be enough… enough for everyone. It’s inevitable there is and will be strain in the further reaches of the supply chain,” he said.

Yesterday, the grocer announced it plans to add 3,500 staff and boost its online operations to help meet the increasing delivery demand. It also plans to open 5 new stores during 2020/21.

Technical analysis: Stock price back to pre-corona levels

Shares of Morrisons have traded above the £2 handle this morning, after rallying more than 25% in the past two days on positive headlines surrounding the grocer. The stock price traded at this level in December, before the coronavirus outbreak.

Morrisons stock weekly chart (TradingView)

As you can see, the price action has been creating a monster bullish candle on a weekly chart. Yesterday, before the news on profits and staff hiring, shares of the company fell to a 4-year low around the £1.6 handle.

The price is now testing the descending trend line (the red line), while the major horizontal resistance sits at £2.1. On the downside, yesterday’s low is the benchmark for the bears now.

Summary

Morrisons stock price has rallied more than 25% higher since yesterday after the company posted a 3% rise in the pre-tax profit. Moreover, the grocer plans to add 3,500 staff to cope with an increase in demand for its delivery services.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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