Centrica share price drop this year has left many investors wondering if the stock will ever recover from this massive decline, as a recent cap on gas prices in the UK and an environment of lower natural gas prices caused the company nearly £1bn in losses last year.
Meanwhile, the stock continues to see significant downward pressure as the coronavirus crisis continues to unfold around the globe and commodity prices go down as a result of lower demand from industrial clients.
None of these elements are contributing to a potential recovery for Centrica and there are no clear indications of a turnaround, while certain short-term technical indicators are pointing to what could be a sustained bearish outlook, as Covid-19 advances once again in the US at an accelerated pace.
Centrica share price forecast
There are many catalysts driving the price of Centrica shares down.
Some of the most prominent ones include the price cap set by the UK government on gas prices, the recent surge in coronavirus cases in the US, which could push down demand for longer than expected, a highly competitive environment, and lower energy prices resulting from a gloomy global economic outlook.
In light of such a high number of negative drivers, most analysts agree that Centrica share price forecast 2020 is pointing down, even though a potential shift in at least one of those catalysts could push the stock up a notch.
Centrica shares closed one per cent lower today, making it the third consecutive red day for the owners of British Gas.
The negative performance seen in the past few days is consistent with the losses seen by most energy stocks around the world, as the US virus situation continues to deteriorate, threatening the recovery of global demand and of Centrica’s business as well, as the North American country is both one of the largest consumers of energy in the world and an important geographical revenue segment for Centrica.
Now, there seems to be positive sentiment towards Centrica, at least in the short-term, as we can see that 92 per cent of the traders within the platform are buyers.
So, will Centrica shares go up? At this point, there are two things that traders should keep in mind to pick a side.
From a technical standpoint, there are various elements that seem to be pointing to a further decline for CNA shares.
First, the RSI seems to be on a freefall since it hit the 65 level in early June and has been posting lower highs, which is an indication that CNA price is consistently losing strength.
However, it is important to note that there has been some strong support in the past at the 42.5 – 44 level for the RSI, and it would be a good idea to keep an eye on how the stock price behaves in the next few days as if it crosses that threshold that may be a signal that the stock could be headed for a much lower territory.
Meanwhile, the intraday MACD is sending a sell signal since 22 June and momentum seems to be growing, favouring potential subsequent declines for Centrica shares in the next few days.
Additionally, the latest trading volume hasn’t really reached panic-like levels, which points to the fact that bearish sentiment towards the stock may go beyond a temporary selling spree.
On the other hand, there are certain merits to a bullish thesis on Centrica shares, even though there are fewer variables pointing to a significant trend reversal.
Based on my analysis, the bullish thesis would be founded on the weekly outlook of the stock, as the MACD is sending buy signals and some momentum appears to be picking up.
Additionally, the RSI is headed to oversold territory, which could be another indication that the price may turn around in the next few weeks.
In my view, both theses may be right and profiting from them will essentially depend on your holding period.
If you see CNA as a day trade, most indicators are favouring a bearish outlook. However, if your holding period goes beyond a week, there are certain signals pointing to a potential reversal, possibly within the next month or so.
Centrica share price news
Only a few weeks ago, Centrica announced that it planned to cut around 5,000 jobs across multiple business units, following the company’s restructuring efforts, which aim for a “simpler and more customer-focused business model” approach.
The company said it plans to remove at least three layers of management from its organisational structures in order to create a flatter organisation while adding that at least half of the group’s 40 senior leaders will leave Centrica by the end of August.
Centrica’s CEO Chris O’Shea commented: “Since becoming chief executive almost three months ago, I’ve focused on navigating the company through the Covid-19 crisis and identifying what needs to change in Centrica. We’ve learnt through the crisis that we can be agile and responsive in the most difficult conditions and put our customers at the heart of our decision making.
However, I believe that our complex business model hinders the delivery of our strategy and inhibits the relentless focus I want to give to our customers. We have great people, strong brands that are trusted by millions and leading market positions, but the harsh reality is that we have lost over half of our earnings in recent years. Now we must bring focus by modernising and simplifying the way we do business.”
Based on investors’ response to these announcements, there seems to be significant skepticism around the possibility of turning around a corporation with such a long track record of doing things in a similar way, at least on short notice.
Trade Centrica PLC – CNAl CF
Centrica shares: buy or sell?
Depending on your holding period, I would say that this CNA share price forecast points to a sell for day traders while a buy for traders with a longer trading horizon – possibly a couple of weeks.
For day traders there’s a 21 per cent upside if the stock pushes towards its 30 pounds’ year-to-date bottom, while for those who are willing to hold on to CNA shares for longer, a potential resistance may be found at 43 – 45 pounds.
According to the latest Centrica share forecast by MarketBeat, the CNA stock received a consensus rating of Hold. With the expected price target of £54.49, Centrica has a potential increase of 38 per cent from its previous close price of £39.29.
Follow the latest market news at Capital.com and make your own Centrica share price forecast. Don’t forget that with CFDs you can always try to profit from any future price fluctuations, regardless of their direction, by taking a long or a short position respectively.