IWG share price forms a bullish pattern as WeWork woes mount

IWG (LON: IWG) share price remained in a tight range after the company published strong financial results. The stock was trading at 151p on Tuesday, where it has remained at in the past few days. This price is about 17% above the lowest level in June.

Regus and WeWork diverge

IWG published encouraging financial results on Tuesday. In a statement, the company said that its revenue jumped to a record £1.67 billion in the first six months of the year. Its EBITDA jumped by 48% to £198 million. At the same time, the company’s cash flow jumped to £162 million while its net debt dropped by £54 million. 

Further, Worka, a platform for hybrid working, saw its revenue jump by 32% to £153 million. Despite this performance, the company warned that it was facing substantial forex headwinds and a challenging economic and competitive environment.

IWG biggest competitor is WeWork, a company that was once worth over $45 billion. On Tuesday, WeWork said that its revenue rose to $844 million in Q2 while its net loss jumped to $397 million.

Most importantly, WeWork warned that its business was going through a challenging period. As such, the management said that the company could go out of business in the next few months. The statement said:

“As a result of the Company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the Company’s ability to continue as a going concern.”

As a result, WeWork stock price plunged by over 24% in extended hours, bringing its market cap to just $150 million.

As I wrote here a few months ago, a collapse of WeWork could have a marginal benefit to IWG. That will happen as companies that use WeWork’s spaces move to IWG’s brands like Regus, Spaces, and Signature.

IWG is a bit different from WeWork in that it uses an asset light business model. In this, the company partners with landlords to offer their spaces. It also uses a franchise model that enables it to earn fees without making huge investments. As a result, the company signed more deals in the first half of the year than it did in 2022.

IWG share price forecast

IWG chart by TradingView

IWG stock price has been in a consolidation phase in the past few days. On the four-hour chart, the Relative Strength Index (RSI) has moved to the neutral point while the shares are slightly above the 25-period moving average.

Most importantly, the stock has formed an inverted head and shoulders pattern. In price action analysis, this is one of the best reversal patterns in the market. The stock is now along the neckline of this pattern. Therefore, there is a likelihood that the shares will bounce back as buyers target the key resistance point at 175.2p, the highest point on April 14.