Pennon Group Share Price Forecast July 2021 – Time to Buy PNN?

Shares of Pennon Group PLC (LSE: PNN) grabbed the headlines after it edged higher by 3.83% after  Societe Generale downgraded it from a “buy” to a “hold”. This was done after completing the £814 million acquisition of Bristol Water last week. The shares of the British utility company have increased by 23.9% after disposing of its waste management recycling and renewable energy subsidiary, Viridor.

Pennon Group PLC – Technical Analysis

The financial statement from Pennon Group PLC reveals a market cap of £4.789 billion, a total debt of £2.855 billion and total assets worth £6.42 billion.  The company’s profits reached £1.76 billion in the 2021 fiscal year, compared to £200.4 million the previous year. However, the company’s revenue from continuing operations fell from £636.7 million the previous year to £624.1 million this year.

If we look at the technical information, we will find that moving averages such as Exponential Moving Average (10)(1141), Simple Moving Average (10)(1140.7), Simple Moving Average (50)(1081.8) and Hull Moving Average (9)(1146.4) are pointing towards buy. On the flip side, oscillators Stochastic %K (14, 3, 3)(58.7), Commodity Channel Index (20)(197.4) and Ultimate Oscillator (7, 14, 28)(50.4) point towards neutral.

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Recent Developments

Following the Viridor disposal, Pennon Group PLC paid out a special dividend of 355p per share. Its overall official dividend has been reduced by 50% due to the Covid-19 pandemic. It benefitted from the recent rally in value stocks as investors disposed of their growth stocks from last year. Currently, its shares are trading near their all-time high of 1209p, with interested investors waiting to see if they break above this crucial price point. However, its more than likely that PNN shares will encounter resistance at this level and trade sideways before eventually reversing and heading lower or breaking above the level.

Should You Buy PNN Shares?

PNN shares traded at 1178.75p on Monday, edging 3.83% higher than the closing price of1135.25p on Friday. The management is using the cash from the sale of Viridor to pay down almost £1.1 million of debt. It has also planned for acquiring Bristol Water for £425 million.

However, the investment yield of 1.9% is a bit disappointing for investors. Even though it is set to rise above 2% in the next five years, there are several other options for better returns elsewhere. This leaves investors relying on share price growth as the only consideration to get a satisfactory profit, which is not guaranteed. There are also few issues from the dividend perspective, which will cause investors to stay away from these shares for a while.

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