Centrica share price could plunge by ~11.2%, chart pattern shows
Centrica (LON: CNA) share price has been in a consolidation phase in the past few weeks. The stock has been hovering near its all-time high of 107p as investors reflect on last year’s strong performance and whether the company will do better this year. It has jumped by ~60% from its lowest point in December, meaning it has outperformed the FTSE 100 and FTSE 250 indices.
Can British Gas parent maintain its growth?
Centrica was one of the best-performing companies in the UK in 2022. The company, which provides energy to millions of people, took advantage of the rising energy prices to boost its revenue and margins. Results published recently revealed that the company’s revenue jumped from £18.3 billion in 2021 to over £33.6 billion. Its adjusted earnings jumped from £237 million to more than £2.05 billion.
Most of the operative profits came from its optimisation business, which made £1.44 billion. Its infrastructure business made £1.3 billion while its retail solutions came in at £94 million. Most of this growth happened as Russia’s invasion of Ukraine boosted natural gas prices.
Looking ahead, there are concerns that Centrica will not be able to match its growth this year. For one, the gas challenges we experienced last year will likely ease this year. This is reflected by the fact that natural gas prices have been in a downward trend in the past few months. Data shows that natural gas price has crashed by over 65% in the past six months, as shown below.
What is safe, however, is the company’s dividend and share buybacks. After cutting its dividend during the pandemic, the company reinstated it in 2022. It paid a full-year dividend of 3p and started buying back its stock. The firm is buying back shares worth over £650 million, which is substantial considering that the company has a total market cap of about £5.98 billion.
Centrica share price forecast
The daily chart shows that the Centrica stock price has been in a strong bullish trend in the past few months. Along the way, the shares have formed a rare rising wedge pattern, which is a bearish sign. It is a rare pattern that tends to happen before a major bearish breakout.
Therefore, Centrica stock will likely have a bearish breakout as sellers target the key support at 92.50p, which was the highest point on July 28. This price is about 11.2% below the current level.
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