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The tragic collapse of the THG share price explained. Buy the dip?

By:
on Sep 15, 2022
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  • THG stock price has been in a strong bearish trend.
  • It has fallen by more than 95% from its all-time high.
  • The company published weak earnings and lowered its guidance.

THG (LON: THG) share price collapsed to a record low after the company published weak financial results. The stock dropped by more than 20% and hit an all-time low of 37p. It has fallen by more than 95% from its all-time low, bringing its total market cap to about 501.8 million pounds.

THG becomes a fallen angel

THG, formerly known as The Hut Group, is a technology company that operates several brands in the UK and in Europe. The firm operates several brands like ESPA, Cult Beauty, LookFantastic, Grow Gorgeous, and MyProtein among others.

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The company, which was backed by Softbank, has become under intense pressure in the past few years as growth stalls. Its situation worsened when the company announced that it had turned down several acquisition bids. 

THG share price dropped sharply on Thursday after the company slashed its full-year guidance. In a statement, the firm said that its sales growth will be between 10 and 15% this year. It also expects that its adjusted earnings will be between 100m and 130m pounds for the year ending in December. 

This is the second time that the company slashed its forward guidance. Early this year, it slashed its sales growth to between 22% and 25%. In a statement, Matt Moulding, the company’s founder and CEO said:

“The strength, resilience and agility of our vertically integrated business model, coupled with automation, has enabled us to significantly invest in price protection for consumers currently facing unprecedented cost-of-living challenges.”

THG made record sales of 1.1 billion pounds in the first half of the year while its EBITDA fell to 32.3 million pounds. Cash outflow was over 271 million pounds.

So, is THG a good investment? Analysts believe that the THG share price will continue falling in the coming months as its cash burn continued.

THG share price forecast

thg share price

The daily chart shows that the THG stock price has been in a strong bearish trend in the past few months. Along the way, the shares have crashed below the 25-day and 50-day moving averages. The shares have moved below the important support level at 70.7p, which was the lowest level on March 7. 

The Hut Group’s Relative Strength Index (RSI) has moved below the most oversold level since October last year. You can read more about the RSI here. Therefore, the share price will likely continue falling as sellers target the next key support level at 30p.