JD Wetherspoons: Well Positioned To Survive, Ascending Trend Line Holds

JDW is well positioned within the UK pub sector to return to profitability fast when the sector reopens.

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Whilst the coronavirus lockdown meant that revenue dried up overnight for pubs, the broad expectation is that JDW is well positioned within the UK pub sector to return to profitability fast when the sector reopens. 

Prior to the lockdown JD Wetherspoons’ half year results showed that net debt and borrowing facilities were similar to previously reported and management sounded confident about liquidity levels. 

Since then JD Wetherspoons raised 141 million through a share placing to help weather the coronavirus storm. Its workers have been furloughed and its dividend cancelled.
The pub is looking to reopen its doors in or around June, although this largely depends on the British government which is due to set out its exit strategy announcement later this week. 

When pubs do open it will be with social distancing rules. This will clearly impact revenues. How prepared the UK public is to go to pubs will also be extremely important. If the public doesn’t feel sufficiently confident in the governments exit strategy to visit pubs and restaurants, this could be devastating for the sector, as could a very drawn out easing of restrictions.

Germany is set to reopen restaurants and bars later this month. Some US states are also moving towards reopening this sector of the economy. It is worth keeping a close eye on how these reopenings fare for clues as to what we can expect in the UK. Boris Johnson’s exit strategy is also key.

JD Wetherspoons no longer intends to issue a trading update on 13th May. 

Levels to watch:
JD Wetherspoons has dived from pre coronavirus levels of around 1540p to a March low of 494p However, the stock has rebounded 15% over the past month 6 weeks picking up from March 19th lows to today’s 920p.
The stock price remains supported by its ascending trendline and trades above its 50 and 100 sma on 4 hour chart. 
Immediate support can be seen at 910p trendline support, prior to 883p (50 sma) and 800p (low 24th April)
Immediate resistance can be seen at 1047p (high 30th April) prior to 1117p (high 13th March).

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