Tesco shares have fallen 24% YTD. Should I invest?..

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Tesco increased the interim dividend by 20.8% y/y
Tesco will create 16,000 new permanent jobs to accommodate exceptional growth in online business
If the price falls below $2.5, it would be a “sell” signal and we have the open path to $2.3.

Tesco’s (OTCMKTS: TSCDF) shares have dropped from $3.48 to below $2.3 in less than a few months and the current price is around $2.6. Tesco is positioned to weather the storms associated with COVID, but if the price falls below $2.5 it would be a “sell” signal.

Fundamental analysis: Tesco will create 16,000 jobs to handle the exceptional growth of its online business.

Tesco is a British multinational grocery and general store retailer with over 3400 stores nationwide. Tesco employs over 450,000 people in 11 stores and it is important to note that Tesco has over 42 million transactions per week in the UK.

Even with the COVID 19 pandemic, Tesco’s business is doing well and the company is expected to see an increase in sales in the next financial year. Tesco recently released its first half results, with total sales up 0.7% year-on-year and retail operating profit up 4.4%.

The company increased the interim dividend by 20.8% y/y, in line with its policy of setting an interim dividend at 35% of the dividend for the full year of the previous year. Tesco began supplying free food in the UK and the main idea behind this is to protect its market share from Amazon.

According to recent reports, Tesco will create 16,000 new permanent jobs to accommodate the exceptional growth of its online business, and the number could even increase if the suspension of the coronavirus further boosts its sales. Tesco’s shares are currently attractively valued and analysts say the company is able to weather the storms associated with COVID.

This share could be a good long-term investment, but perhaps now is not the best time to buy Tesco shares, as the share price may weaken further in the coming weeks.

Technical analysis: Bears focus on breaching the support level at $2.5

If you trade in Tesco shares, you should be aware that the price could fall even further in the coming weeks.

Data source: tradingview.com

On this diagram I have marked important resistance and support levels. The important support levels are $2.5 and $2.3, $2.8 and $3 represent the resistance levels.

If the price jumps above $2.8 it would be a signal to buy this stock and we have the open path to $3. A rise above $3 supports the continuation of the uptrend and the next price target could be $3.3 or even $3.5.

On the other hand, if the price falls below $2.5, it would be a “sell” signal and we have the open path to $2.3.

Summary

Even with the COVID 19 pandemic, Tesco’s business is doing well and the company is likely to see increased revenues for the next fiscal year. Tesco will create 16,000 new permanent jobs to cope with the extraordinary growth of its online business, and the number may even increase as the blocking of the coronavirus further increases its revenues. I believe that this share could be a good long-term investment, but perhaps now is not the best time to invest in Tesco shares as the share price could fall even further in the coming weeks.

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