Tesco share price analysis ahead of earnings: buy or sell?

Tesco share has done modestly well in the past few weeks and is hovering near its all-time high as traders wait for the upcoming financial results. It was trading at 487p on Tuesday, down slightly from the all-time high of 510p.

Tesco to publish its earnings on Thursday next week 

TSCO, the biggest retailer in the UK, will be in the spotlight as it releases its financial results on Thursday next week.

These results come at a time when the UK economy is going through a period of stagflation, which is characterized by slow economic growth and high inflation rate.

The most recent report showed that the UK inflation rose 3% in February, a trend that will continue now that energy prices have soared during the ongoing Iran war.

Tesco has always been highly resilient whenever there are major macroeconomic activities in the UK because it is often seen as a place where customers find bargains. This is a similar advantage that has made Walmart the biggest retailer in the US.

In a statement in January, the company said the its UK like-for-like sales rose by 3.9% in the third quarter, with the Christmas sales rising 3.2%. Its Republic of Ireland (ROI) sales grew by 5%, while Booker sales fell by 0.9%.

The company noted that competition remained stiff as ever and is banking on its Every Day Low Prices, which cover over 3,000 products. This approach has helped it continue to gain market share to 28.7%.

Tesco’s investments in digital sales during the pandemic have also helped it gain market share. Its online sales rose to 11.2% in the third quarter.

The upcoming results are expected to show that its operating profit will be near the upper range of its guidance of between £2.9 billion and £3.1 billion. Its free cash flow is expected to be between £1.4 billion and £1.8 billion.

There are signs that the company is still cheap, especially when compared with other companies in the retail industry. It has a price-to-earnings ratio of 21, lower than Walmart’s 46, Kroger’s 46, and CostCo’s 52.

Tesco share price technical analysis 

TSCO stock chart | Source: TradingView 

TSCO stock price has jumped sharply in the past few months, moving from a low of 411p in January to the current 487p.

The stock recently crossed the important 100-day Exponential Moving Average at 457p, a sign that bulls have prevailed.

It has remained above the Supertrend indicator this week. Also, it soared above the Strong Pivot Reverse point of the Murrey Math Lines tool at 468p.

There are signs that the stock is forming an inverted head-and-shoulders pattern, which often leads to more gains.

Therefore, the most likely Tesco stock forecast is bullish, with the next key target level being the all-time high of 511p. A move above that level will point to more gains, potentially to the extreme overshoot level of 531p.