The Spar Group Ltd. (JSE: SPP) shares have fallen over 6.8% year-to-date in 2024, carrying some baggage from a weaker 2023 with only 3.88% gains. A five-consecutive session dip and recent Christmas trading below expectations raised concerns about consumer spending and potential growth slowdown, painting a picture of near-term struggles.
However, not all is bleak. Optimistic analyst consensus (“HOLD”) suggests potential stability, and company efforts to improve their image through board restructuring and PR hires could be promising. Spar also faces an opportunity with the end of exclusive leases, potentially opening up new market options.
But internal issues cast a long shadow. The CEO’s hefty payout amid scandals surrounding loans and racial discrimination, the R1.4 billion IT system blunder, and ongoing debt concerns raise red flags, tarnishing the company’s reputation and eroding investor confidence.
Technical
The daily chart shows that the Spar’s share trades at R109.92, confined within an ascending channel trading pattern. The price action currently resides above a significant demand zone following a sharp break below the 50-SMA (blue line), 100-SMA (orange line) and 200-SMA (red line).
The break below the key SMAs suggests the presence of the bearish; however, the recent break of the 50-SMA above both the 100-SMA and 200-SMA could signify the change in sentiment in the short-term, with the demand zone likely to provide significant support should sentiment intensify.
Therefore, the supply zone (green) could act as the next significant hurdle should the demand zone (red line) hold. A successful break above the supply zone, on significant volume, would leave the R120.89 and R130.11 resistance levels within the bulls’ reach. A break on low volume would leave the potential for a false breakout firmly in play.
Conversely, a break below the demand zone and the channel would likely bring the R102.29 support level into play. A break below the initial support level could trigger a sell-off lower, with the R96.78 and eventually, R89.50 support level acting as next levels of significance.
Summary
The Spar Group Ltd. faces a confluence of headwinds in 2024, buffeted by both external and internal challenges, but shows glimpses of potential recovery. While the technical analysis suggests a potential for a short-term rebound, the fundamental factors remain a cause for concern, and the company could need to gain back investor confidence before the share can embark on a spirited recovery.
Sources: TradingView, The Spar Group Ltd., Business Live, IOL, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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