FTSE 100 shares analysis: IAG, Burberry, British American Tobacco
UK stocks are not doing well as the momentum experienced earlier this year faded. The blue-chip FTSE 100 index has dropped in the last five consecutive days, to trade at £8,270, its lowest point since August 14. It has dropped by over 2.4% from its highest point this year. This article looks at IAG, Burberry, and British American Tobacco (BAT).
IAG share price analysis
IAG (LON: IAG) has emerged as one of the best-performing FTSE 100 companies in the past few weeks as it jumped by over 16% from its lowest point in August. It is also nearing its highest point this year.
IAG’s stock has done well after the company published strong financial results and restarted its dividends. Its results showed that total revenue rose from over 13.58 billion euros to €14.72 billion in the first half of the year.
IAG has also become a highly profitable company as its profit after tax moved to €905 million. It has also boosted its cash and cash equivalents to €9.6 billion while its net debt has dropped to €6.4 billion.
These numbers mean that IAG, the parent company of British Airways, is doing better than most airlines, helped by its transatlantic route.
The IAG share price has done well as I predicted in the last report. It has recently crossed the important resistance level at 180p, its highest point on July 10th and the neckline of the double-bottom pattern that formed at 160p.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA) and is nearing the year-to-date high of 187.60p. Also, the Relative Strength Index (RSI) is stuck at the overbought level.
Therefore, the stock will likely continue rising as bulls target the next psychological level at 200p. For this to happen, the stock will need to move above the key resistance level at 187.6p.
British American Tobacco
Tobacco companies have gone through substantial headwinds in the past few years. While the number of smokers is growing, the momentum has faded. These companies are having to pay higher taxes and their transition to alternative smoking products is not going on well.
As a result, British American Tobacco (BAT) was forced to take a $31.5 billion write down of its US business in 2023.
Still, tobacco stocks are doing great and beating benchmark indices like the FTSE 100 and the S&P 500. BATS shares have risen by almost 40% from its lowest point in December last year and has risen in the last five consecutive months. It is also hovering at its highest point since January 2023.
The most recent financial results showed that BAT’s revenue dropped by 8.2% in the first half of the year to £12.34 billion while its profit from operations fell to £4.2 billion. What was notable, however, is that its new categories business did well even though it accounts for a small part of its total business.
The weekly chart shows that the BATS share price has been in a strong bull run in the past few years. It recently crossed the important resistance point at 2,490p, its highest point in September last year.
Most notably, the 200-day and 50-day moving averages have crossed each other, forming a golden cross pattern. The RSI has jumped to almost 80, meaning that it has the momentum.
Therefore, the stock will likely continue rising as bulls target the next resistance point at 3,022p, its highest point in 2022. More gains will only happen if it crosses that level.
Burberry share price analysis
Burberry, the biggest British luxury brand, has become a fallen angel as its stock has retreated in the past 14 consecutive months. It has also plunged to its lowest swing since 2010, making it one of the worst-performing FTSE 100 companies.
Burberry’s market cap has dropped to below £4 billion, meaning that it could be delisted from the FTSE 100 soon. Its crash is mostly because of the ongoing weakness in its China business and the general lack of appeal among customers. It is the same issue facing Kering, the parent company of Gucci.
On the monthly chart, we see that the Burberry stock price peaked at 2,462p in April 2023 and formed a doji pattern. In technical analysis, a doji is one of the most bearish signs in the market.
The stock has then dropped in all but two months since then and moved below the 200 moving average. Also, the Relative Strength Index (RSI) has moved to the extreme oversold level of 23.50.
Therefore, the stock will likely continue falling as sellers target the next psychological point at 500p. Burberry will ultimately recover or be acquired but the path to recovery will be long.
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