JD Wetherspoons: Well Positioned To Survive, Ascending Trend Line Holds

JDW is well positioned within the UK pub sector to return to profitability fast when the sector reopens.

Charts (6)

Whilst the coronavirus lockdown meant that revenue dried up overnight for pubs, the broad expectation is that JDW is well positioned within the UK pub sector to return to profitability fast when the sector reopens. 

Prior to the lockdown JD Wetherspoons’ half year results showed that net debt and borrowing facilities were similar to previously reported and management sounded confident about liquidity levels. 

Since then JD Wetherspoons raised 141 million through a share placing to help weather the coronavirus storm. Its workers have been furloughed and its dividend cancelled.
The pub is looking to reopen its doors in or around June, although this largely depends on the British government which is due to set out its exit strategy announcement later this week. 

When pubs do open it will be with social distancing rules. This will clearly impact revenues. How prepared the UK public is to go to pubs will also be extremely important. If the public doesn’t feel sufficiently confident in the governments exit strategy to visit pubs and restaurants, this could be devastating for the sector, as could a very drawn out easing of restrictions.

Germany is set to reopen restaurants and bars later this month. Some US states are also moving towards reopening this sector of the economy. It is worth keeping a close eye on how these reopenings fare for clues as to what we can expect in the UK. Boris Johnson’s exit strategy is also key.

JD Wetherspoons no longer intends to issue a trading update on 13th May. 

Levels to watch:
JD Wetherspoons has dived from pre coronavirus levels of around 1540p to a March low of 494p However, the stock has rebounded 15% over the past month 6 weeks picking up from March 19th lows to today’s 920p.
The stock price remains supported by its ascending trendline and trades above its 50 and 100 sma on 4 hour chart. 
Immediate support can be seen at 910p trendline support, prior to 883p (50 sma) and 800p (low 24th April)
Immediate resistance can be seen at 1047p (high 30th April) prior to 1117p (high 13th March).

More from Equities

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account