May has been a good month for a lot of FTSE 100 stocks. But for Tesco (LSE: TSCO), it’s been a sideways month with no real overall movement. Where will the Tesco share price go in June and beyond?
I don’t try to predict such short-term movements with any seriousness. But it can be fun to look out for what’s coming up and what might affect the shares we hold. On that front, Tesco has a first-quarter update scheduled for 18 June. The last full year is a tricky one to go on, as there’s clearly been a big Covid-19 effect. While profit took a tumble, sales were up. People still need to eat, and Tesco’s home delivery service kept it at the front of consumers’ minds.
But any pandemic-related sales boost will not last as we edge ever closer to normality. And the Tesco share price will surely moved towards a longer-term valuation. Tesco recognises the upcoming shift, covering it at full-year results time.
The company told us “we expect some of the additional sales volumes we have gained this year in our core UK market to fall away as Covid-19 restrictions ease.” But it added that “we expect a strong recovery in profitability and retail free cash flow as the majority of the additional costs incurred as a result of the pandemic in the 2020/21 financial year will not be repeated.”
Tesco share price uncertainty
By the time the Q1 figures are out, we’ll be a couple of months on from that. We should have a little more clarity, with a little less uncertainty affecting the Tesco share price future. We’ll also be heading for the planned next step in lockdown easing. The full lifting of all remaining Covid restrictions is provisionally scheduled for 21 June. That might not happen, mind. With rising cases of the so-called Indian variant, Prime Minister Boris Johnson has said we might need to wait.
Even with a full lifting of restrictions, Tesco is not going to see the full effect until its second quarter at least. And I wouldn’t be surprised to see the Tesco share price not really going anywhere for the next few months. But for Q1, my focus will be on relative sales figures, between in-store shopping and online orders. I think online orders should fall back. But I’m not convinced the reversal will be as large as some folks believe.
The pandemic lockdown has, I think, brought forward an inevitable trend. Many people have tried online ordering for the very first time. Some don’t like it, and will go back to shopping in person, for sure. But a lot of newcomers to the experience have found that they like the convenience. And they’ll stick with it.
When the pandemic is finally, fully, behind us, we’ll be back to the same old issues. And that includes price competition from the cut-price Lidl and Aldi chains. That risk has largely receded over the past 12 months, but it will be back. And the Tesco share price? Whatever happens in the short term, I still have Tesco on my long-term buy list.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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