Publication date: May 29, 2024
You may be aware of the familiar old stock market wisdom such as Sell in May and go away, but remember to be back in September. In other words; sell all stocks in May and buy again in September because the summer period is historically worse for stock prices than the winter months. If you look at stock prices over a long period, the winter months are indeed better for stock prices, but it is certainly not a law of averages.
Specifically for brewers, there is also an old stock market saying; that more beer is drunk in the summer, so you should buy shares of brewers. This wisdom is quite outdated as far as we are concerned. Thanks to the globalization of Heineken, for example, sales have long since ceased to depend on a good summer in the Netherlands. So much for old stock market wisdom. In this article, we are going to analyze Heineken's share price ahead of the summer period.
The Heineken name needs no introduction. The brand name is known worldwide. The company is active in 200 countries and is one of the largest beer brewers in the world, operating 300 brands in addition to the Heineken brand.
Price development: analysis and trends
When it comes to predicting Heineken's price movement, there is a distinction between technical analysis and fundamental analysis.
Below you will find Heineken's chart for the past five years. It clearly shows the technical resistance at €105 and the technical support around €80. The outlier downward was at the time of the COVID-19 pandemic outbreak. Thus, the price has been fluctuating within the relatively narrow range of €80 and €105 for five years. At the time of writing, Heineken stands at € 92.50.
We are going to zoom in below on the price movement from the last top of €105 in May 2023 and especially on the movement up from last November.
Based on technical pattern recognition, the recovery after the fall from €105 to €82 was recently completed at the last top of €97. Technically, this allows Heineken to drop below the €80 support level. Based on technical analysis, the price target is around €75.
Fundamentally, the expectation is exactly the opposite. Heineken's decline at the time was caused by increased inflation during that period. Currently, inflation is decreasing and the Central Banks have been discussing an interest rate cut for some time. Moreover, after a period of declining volume in beer sales, Heineken has been able to report an increase in volume again. In addition, almost all banks are positive about Heineken shares and issued a price target of around €100.
Prospects and expectations
Heineken is a pride of the Netherlands, a company that showcases excellence. From a fundamental perspective, it is a valuable addition to any long-term portfolio, especially when the price hovers around €80.
For the moment, we are less positive for the short term. Technically, the possibility of a fall even below € 80 is the most likely scenario. The good news about declining inflation and rising volumes has been incorporated into the share price and has caused the recovery from € 82 to € 97.
Therefore, a potential drop to €75/€80 presents an opportunity to purchase the stock at an attractive price. So, perhaps selling in May could indeed be a wise decision after all...
Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.
