Financial Trading Blog
Stock of the day 17/05/2016 – Mothercare PLC
Since the start of the year more and more Mothercare investors have flown the nest, the stock seeing a near uninterrupted decline that has left it at its worst price for 16 years. The company’s 2016 troubles began almost immediate; having opened at £2.25 a third quarter update in the middle of January sent the stock 5% lower to £2.08 as Mothercare’s group sales dropping 5.4% year-on-year.
The turbulence at the beginning of February lopped another 10% off its stock price, before a gentle rise back to the £2 mark by the end of the month was wiped out by another drop at the start of March. That put Mothercare back on its painful path, dipping below £1.80 as April got underway before a brief spurt saw it climb to £1.90.
(Source: IT-Finance.com 17/05/2016)
Yet the worst was still to come for the Early Learning Centre-owner. Mid-April’s fourth quarter report put the fear of god in investors, with news that overseas sales had fallen nearly 11% in the 11 weeks to 26th March causing a stomach-churning 21% plunge in the company’s price on the day of the announcement alone. The economic slowdown in China, the effect of oil’s slump in the Middle East, and the choppy currency movements in Europe and Latin America were all pointed to as reasons for the sales slide, placing Mothercare at an unpleasant intersection of international issues.
The fact that UK like-for-like sales grew by 2.1% and online sales jumped 5.6% didn’t matter one bit to investors, and by the start of May the company had hit that aforementioned 16 year low of £1.02. Since the stock has bounced back a bit, though at a current trading price of £1.18 (IT-Finance.com, 17/05/2016) the value of the company has still halved in less than half a year.
Mothercare PLC has a consensus rating of ‘Hold’ with an average target price of £2.19.
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