Tesco share price has retreated: Is it a bargain or a value trap?

Tesco share price has remained in a narrow range in the past few months despite the company’s growing market share and profitability growth. It was trading at 442.2 on Monday, inside a narrow range it has remained at since December. This article explores whether it is a good investment today.

Tesco’s business is thriving

Tesco, the biggest retailer in the United Kingdom, is doing well, helped by its strong geographical presence across the country and its cheaper prices. 

The company has also benefited from the management’s focus on cost management, investment in e-commerce, and price matching. All these factors have helped it continue gaining market share across other companies, including Aldi. 

It also benefited from its premium and store brands, with Tesco Finest experiencing double-digit growth for three years. Tesco’s Clubcard loyalty program is driving sales with over 24 million households participating.

Additionally, the management has simplified its business by exiting its non-core businesses. The most notable one was selling its banking operations to Barclays.

Recent results showed that the company’s like-for-like sales rose by 4.3%3 in the first half, with growth happening across the UK, Republic of Ireland (ROI), and Booker. 

Its revenue rose to £33 billion, up by 5.1% from the same period last year, with its adjusted operating profit rising modestly to £1.67 billion. Tesco’s free cash flow rose to £1.2 billion.

These results were much better than what the management was expecting, as consumers reacted positively to its initiatives. As a result, the management lifted its forward guidance for the fiscal year.

Tesco expects to make an adjusted profit of £3.1 billion, up by £100 million from the previous guidance of £3.1 billion. It also expects to save £500 million this year to offset higher operating costs. 

Therefore, Tesco share price has remained on edge as investors assess its performance and the impact of competition. There are concerns that its profitability will be impacted over time. 

On the positive side, there are signs that the company is relatively undervalued. It currently trades at a price-to-earnings (P/E) ratio of 17, which is much lower than other top retailers like Walmart and Sainsbury, its top competitor. It is also lower than the FTSE 100 average of 19.

Tesco share price technical analysis 

The daily timeframe chart shows that the TSCO stock price has pulled back from the 2025 high of 481p to the current 442p. This retreat was in line with our forecast.

It has remained above the ascending trendline that links the lowest swings since August 8 last year.

The stock has also remained above the 100-day Exponential Moving Average (EMA), which is a bullish sign. It is also slightly above the Major S/R pivot point of the Murrey Math Lines tool. These technicals point to an eventual recovery, potentially to the ultimate resistance at 468p. 

However, the risk is that the stock has formed a head-and-shoulders-like pattern and moved below the Supertrend indicator. Therefore, a bearish breakout, potentially to the strong, pivot, reverse level at 421p is possible. This view will be confirmed if it moves below the 100-day moving average and the ascending trendline.

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