Investing 20-10-2022 12:45 11 Views

With the THG share price in recovery mode, is it a buy?

THG (LON: THG) share price rallied to the highest level since August after Masayoshi Son’s Softbank sold its stake in the company. The shares rose to a high of 59.76p, which was about 90% from its lowest level this month. This makes it one of the top-performing stocks in London this month although it is about 93% below its all-time high.

Softbank exits The Hut Group stake

THG is a technology company that operates in the beauty and nutrition industries primarily in the UK. It owns brands like GlossyBox, Grow Gorgeous, MyProtein, Illamasqua, and LookFantastic among others.

The company also owns Ingenuity, a company that designs and mantains websites for leading direct-to-consumer companies like Nestle, Mio, Sanctuary Spa, and Mondelez among others.

THG, formerly known as The Hut Group, has had a difficult time as a publicly traded company. It is a perenially unprofitable company. In the first half of the year, THG said that its operating loss widened to more than 89 million pounds.

The THG share price rose this week after Softbank announced that it was exiting its position. The beleaguered Japanese investor decided to sell its stake in the company to Matt Moulding at Qatar. It was a significant haircut since the stake was once worth over 500 million pounds. Softbank now pocketed just 31 million pounds.

Softbank has been involved in THG for a while. In July, the company terminated its agreement to acquire a fifth of Ingenuity. 

So, is THG a good buy after the rebound? THG has done well recently and outperformed other popular e-commerce and retail companies like Ocado and Boohoo. However, its business remains under pressure with inflation being at an elevated level. As such, there is a likelihood that the stock will resume the downward trend in the coming weeks.

THG share price forecast

The daily chart shows that the THG stock price has been in a strong bullish trend recently. It has risen in the past seven straight days. By doing so, the shares have managed to move above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the overbought level.

Therefore, I suspect that the stock will retest the key resistance point at 70.79p, which was the lowest point on March 7, and then resume the bearish trend. 

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