JD Wetherspoon Share Price Forecast December 2021 – Time to Buy JDW?
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Shares of United Kingdom-based pub company JD Wetherspoon (LSE: JDW) are in the red today, after closing at 820p as of December 13th (17:49 GMT). Pub operators like JD Wetherspoon have faced challenges due to the uncertainty caused by the pandemic. The shares are down by 21% over the past year and are almost half of what they were at the end of 2019.
JD Wetherspoon – Technical Analysis
According to JD Wetherspoon’s financial statement, the market cap of the company is at £110.03 billion with total assets worth £204.924 billion. Revenue for 2021 was at £77.26 billion with a profit margin of -23.44% compared to £126.20 billion in 2020.
Moving averages for JD Wetherspoon such as Exponential Moving Average (10)(872.7), Simple Moving Average (10)(869.3), Exponential Moving Average (20)(894.3), Simple Moving Average (20)(892.2) and Exponential Moving Average (30)(913.2) are indicating a sell action. Oscillators such as Relative Strength Index (14)(32.0), Stochastic %K (14, 3, 3)( 26.4), Commodity Channel Index (20)(−188.4) and Average Directional Index (14)(27.5) are neutral.
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Recent Developments
JD Wetherspoon runs its business with a proven formula, despite facing some criticism. It has built up a popular, resilient business with the help of keen pricing, conveniently sited locations, and an engaged workforce. In 2019, the company reported earnings per share of 71p. It has since turned its popularity with customers into an economically lucrative model. Using economies of scale allows it to secure products from suppliers at a good price. Additionally, a huge part of their customers are loyal, returning customers. The company encourages repeat customers via initiatives such as the Wetherspoon News magazine.
However, the whole pub industry is still reeling from previous lockdowns. On top of that, a significant number of its customers are old and hence feel nervous about getting into a crowded pub. This factor was already coming into play even before the latest threat of more restrictions. In the company’s latest trading update released yesterday, the company warned that the first half of the year maybe only be marginally profitable or even loss-making. Management has failed to make accurate predictions for sales and profits due to uncertainty and government policy shifts.
JD Wetherspoon has waved off concerns regarding staffing shortages and supply chain problems. But this good news can also be a risk. As products such as beer have a comparatively shorter life span, JD Wetherspoon could be forced to throw away stock if pubs are forced to close for long. The company has already tapped the market via a rights issue during the pandemic to improve liquidity. As this move diluted shareholders, there is a risk it could happen again if trading hurts liquidity.
Should You Buy JDW Shares?
Based on its strategy and track record of success, investors have ample reasons to be excited about JD Wetherspoon. However the pub company may end up taking years to recover if further lockdowns. As some patrons won’t return to pubs, there is a real risk that demand will never fully recover and liquidity could shrink.
The battered share price is proof of all the factors that make up the risks. SO the share price could move up again if there is positive news. However, the chances of seeing the 2019 share prices again are slim. There is simply too much uncertainty in the hospitality sector to make an accurate prediction. For investors, buying some shares now and holding it for years waiting for a recovery could be a lucrative strategy.
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