Persimmon share price at risk as key challenges converge

Persimmon share price has slumped this year as some major headwinds have converged. PSN tumbled to 1,075p on Tuesday, down sharply from the year-to-date high of 1,550p. This retreat happened after the weak trading statement from Taylor Wimpey, its top competitor.

Persimmon stock dropped as housing challenges remain

Taylor Wimpey, a top US housebuilder, published a trading statement that sent shockwaves in the industry. It pointed to its slow revenue growth, possibly as mortgage rates remained at an elevated level.

At the same time, the company announced that its business was seeing higher costs because of the ongoing war in Iran. Fuel and other costs have soared, which is affecting its profitability.

More companies in this industry are also facing similar challenges, which may persist now that oil prices are soaring. Data shows that Brent and West Texas Intermediate (WTI) have jumped to over $110 and $100, respectively. Labour costs have also continued rising this year.

Soaring prices mean that UK inflation will remain at an elevated level, which will boost the possibility of rate hikes by the Bank of England (BoE). Economists expect the bank to leave rates unchanged tomorrow (April 30), but maintain a hawkish tone.

At the same time, house prices have slumped in the past few months as demand waned. In Taylor Wimpey’s case, house prices dropped by 1% in the last quarter.

The most recent numbers showed that Persimmon did well last year despite the robust challenges. It sold 11,905 houses at an average price of £278k, up sharply from £268k a year earlier. Also, its operating profit jumped to £478 million from the previous £405 million. 

The next key catalyst for the Persimmon share price will be its trading statement on Thursday. This report will provide more information on its business and how the management is dealing with the elevated costs.

It will also react to the upcoming Bank of England (BoE) interest rate decision on Thursday. Economists believe that the bank will leave rates unchanged at 3.75% as inflation has continued soaring.

Persimmon share price technical analysis

PSN stock price chart | Source: TradingView

The three-day chart shows that the PSN stock price has slumped from a high of 1,548p in February to the current 1,074p. It has already flipped the Supertrend indicator from green to red, a sign that bears remain in control.

The stock has also slumped below the 100-day moving average, a sign that bears remain in control. Also, the Relative Strength Index (RSI) and other oscillators have continued falling.

Therefore, the stock will likely continue falling, potentially to the key support level at 1,000p. A break below that support will point to more downside, potentially to 900p.