Following ADvTECH Limited’s (JSE: ADH) earnings release, the stock witnessed a downward trajectory despite reporting commendable financials. The company showcased robust performance metrics, with revenue up by 13% to R7.86 billion, driven by good enrolment growth across schools and tertiary divisions and a noteworthy 20% increase in EPS to R1.74. However, despite these positive fundamentals, market sentiment appears to have been impacted negatively, potentially due to profit-taking following an impressive 70% 52-week appreciation and concerns over future growth prospects.
ADvTECH’s growth narrative, particularly in Africa, has been a key driver for investor interest, with the company experiencing good student enrolments and revenue growth across its education divisions. Nevertheless, the retirement of CEO Roy Douglas and subsequent leadership transition may have introduced an element of uncertainty, influencing investor sentiment.
Technical Analysis
Despite the positive fundamentals, ADH’s share price tumbled following the earnings release. This could be attributed to profit-taking after a stellar run that saw the share price appreciate over 15% year-to-date and over 70% in the past year.
The technical picture remains bullish overall. ADH is currently trading within an ascending channel above key moving averages, with the key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)] all sloping upwards in a bullish configuration. Additionally, the RSI (63.97) sits comfortably above 50, indicating further upside potential.
If the bulls can regain control, a sustained push higher could bring the recently reached all-time high of 3,000 cents into focus. Further bullish confirmation would come from a breakout above this level on strong volume, opening the door to the 23.60% and 38.20% Fibonacci extension levels (around 3,112 and 3,181 cents, respectively). However, short-term caution is warranted. The recent price dip could see the stock retest the 2,751 support level, which coincides with the 20-SMA. A break below this level, accompanied by significant volume, could signal a shift in sentiment and potentially lead to a test of the 2,595 and 2,381 support levels.
Summary
ADvTECH’s strong fundamentals paint a bullish picture for the long term. However, the recent price drop suggests a potential short-term correction. The market could closely monitor the reaction of the price action to around the 2,751 cent support level. A break above the ascending channel, backed by strong volume, could see the share price retest its all-time high of 3,000 cents. Conversely, a sustained break below the 2,751 cents level could indicate a trend reversal, with the next potential support levels at 2,595 cents and 2,381 cents.
Sources: TradingView, ADvTECH, SimplyWallStreet, BusinessTech, Business Live.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
