Inditex share price has held steady in the past few years as its business remained resilient despite the rising competition from companies like Temu and Shein. It has jumped to €50, its highest point since March 3, and 192% from its lowest point in 2022.
Inditex business is doing well
Inditex, the parent company of Zara, Massimo, Dutti, Bershka, and Stradivarius, is doing well despite the ongoing challenges in the global economy.
According to Bloomberg, the company’s sales jumped by 6% in the five weeks to June 9. This growth rate was higher than what happened in the previous quarter and in line with what analysts were expecting.
The most recent results showed that its sales jumped by 1.5% to €8.3 billion. They grew by 4.2% in constant currency.
Inditex’s profitability continued to boom during the quarter. Its gross profit rose by 1.5% to €5.0 billion, while its earnings before interest, tax, depreciation, and amortization rose by 1% to €2.4 billion.
Inditex’s business has thrived at a time when many companies in the industry are facing major challenges as the economic slowdown in most countries continues. Retail sales in Europe and the United States have wavered in the past few years.
At the same time, it is facing substantial competition from companies like Temu and Shein that have mastered manufacturing and shipping.
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It is also battling high tariffs in the United States, which accounts for about 18% of global sales.
Inditex’s strong performance is because of its lower price, well-known brands, its store expansions and refurbishment of existing stores. It is also spending about €1.8 billion to improve its technology and another €9 million to expand its logistics network.
These strategies have helped it to do better than other companies like H&M and Boohoo. Boohoo stock price has crashed by over 80% from its highest point since the pandemic highs.
A key concern among investors is that Inditex, the biggest listed clothing retailer, has become highly overvalued. Its price-to-earnings ratio moved stands at 29, higher than other companies in the industry. This valuation is also higher than the S&P 500 Index, even though its annual growth rate is less than 2%.
Inditex share price analysis
The three-day chart shows that the Inditex stock price formed a double-top pattern at €54.62 in December and February this year. A double-top is one of the most bearish patterns in technical analysis.
It validated this pattern in March when the company published soft financial results. It has now bounced back and moved above the 100-day Exponential Moving Average (EMA), a sign that bulls are in control. It also jumped above the double-top’s neckline at €47.78.
Therefore, the Inditex share price will likely continue rising as bulls target the next key resistance level at €54, up by 10.3% from the current level. A move below the 100-day moving average at $46 will invalidate the bullish view.
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