The latest Capita share price news that matters to the stock
Capita share price news plays a huge fundamental role in the pricing of this stock.
Capita plc (CPI) shares took a major hit soon after the June 2016 Brexit vote. As companies began to hold back on spending due to the uncertainties raised by the UK-EU divorce, the number of contracts secured by the company dropped by an astounding 43 per cent in the first half of 2017 when compared with the numbers a year earlier.
Contracts with the UK Defence Ministry and M&G Prudential were cancelled, leading to major revenue loss. It is estimated that the loss of the contract with M&G Prudential cost Capita more than £80 million in 2017. Investors reacted negatively and sold their shares fast, driving the price of this stock from its 2016 highs of £12.23 to just above £4 by the end of 2017.
It has been three and a half years since the gloom of Brexit hit Capita. Has there been any positive Capita share news since then?
To be fair, the latest Capita Plc news also does not look encouraging. On February 13, a website covering local London news reported that Town Hall finance chiefs have recommended that Capita be stripped of its existing pension fund administration contract with Barnet Council due to multiple problems with its administration. If this goes through, this would mark the end of the seven-year contract that Capita has had with Barnet Council.
Trade Capita PLC - CPI CFD
Other latest share news for Capita plc (CPI) suggests that a former employee of the company appeared before Harrow Crown Court in January and pleaded guilty to charges of defrauding the Barnet Council pension fund to the tune of £70,596.62. This was the latest in a series of fraud cases that tainted Capita’s administration of the Barnet Council pension fund. Another former employee of Capita is now serving a five-year sentence for defrauding the same pension fund of close to £2 million in 2016 and 2017.
The latest Capita price analysis
Capita share price news and its earnings reports are key fundamentals that dictate price movements for this stock, but it is important to know the entry and exit points for trading CPI shares as well.
The monthly and weekly charts depict the long-term and medium-term outlook for Capita Plc. These charts reveal that the company's shares are in a downtrend. This downtrend had taken the stock from over £7 per share in June 2017 to a multi-year low of just about £1.008 in June 2019.
There has been a slight rally since the lows of June 2019, but this hike seems to have stalled with the breakdown of the trendline which connected the lows of price from June 2019 to January 2020. This breakdown coincides with a period where a divergence signal appeared on the charts (higher highs on price, lower highs on RSI).
Let’s take a look at this weekly Capita stock chart:
The daily chart showcases the outlook for Capita Plc shares in the short term. This chart reveals a number of key technical patterns and key price areas that will define future price action.
Previous highs and lows have been delineated with horizontal lines to indicate possible areas of support and resistance. The RSI oscillator’s signal line has been rejected at the site of previous lows, now acting as resistance areas in a role reversal. With the RSI reading at 37.8, there is still room for the oscillator to push downwards into the oversold area. This also indicates that price still has some room to the downside to follow the indicator.
Here’s what the daily Capita share price chart looks like:
A look at the price action indicates that the price candles depicting recent price activity are locked in a bearish pennant. This bearish pennant formed as a consequence of a consolidation that followed the breakdown of the symmetrical triangle above it. The triangle breakdown occurred following the break of the 1.625 support line, which had intersected the triangle’s lower border.
The market price is testing the horizontal support at 1.490, which happens to be the previous highs of September 2018 and September 2019, as well as a previous low of November 13, 2019. The lower border of the pennant consolidation area also nestles against this price area.
There are two possible resistance targets: the previously broken support/triangle border at 1.625, and 1.739 which is the previous highs of October 16 and December 17, 2019. This area also intersects the triangle’s upper border.
To the downside, possible targets exist in the following areas:
- 1.285, which is the previous low of April 2018 and also the site of role reversals with highs seen in November 2018 and March 2019
- 1.197, where previous lows of May/August 2018, April/August 2019 as well as role reversed highs in January and July 2019
- 1.109, which is the neckline of the W harmonic pattern that formed in June 2019
- 1.008, which is the lowest point of June 2019, where there is a double bottom formation (the troughs of the W pattern)
Short to mid-term Capita price forecast
Many of you reading this may be asking: should I buy Capita shares? Answering this question requires a consideration of what experts at the major banks are saying, as well as the analysis outlook.
So, what future do the experts see for Capita Plc shares?
Deutsche bank upgraded the stock from a “sell” to a “hold” but has cut its price target for the stock from £1.55 to £1.50. The bank noted that Capita Plc is 20 per cent lower than it was trading at the time of the UK election.
UBS has downgraded the stock from “neutral” to a “sell”, predicting a 2 per cent drop for 2020. JPMorgan has also expressed concerns about the stock’s valuation being “too optimistic” and has trimmed the target price from £1.50 to £1.40.
In considering the fundamentals as well as the technical picture, one can say that the technical expectation for the bearish pennant is for price to break lower. This would be in keeping with the trendline break seen on the weekly chart, as well as the overall downtrend that is visible on the monthly and weekly charts.
A break of the bearish pennant to the downside would require two successive daily candles to close south of the pennant’s lower border. This would open the door towards the resistance targets listed above: 1.285 and 1.197 would be the first logical targets. The measured move from the bearish pennant’s breakout point would be completed at the 1.285 price area. Further downside would depend on bearish fundamentals that drive selling pressure.
On the flip side, any fundamentals that drive price recovery would push prices towards the upper border of the pennant to continue the consolidation. Two factors would invalidate the pennant: continuation of consolidation beyond the pennant’s apex, or a break above the pattern. In the case of the latter, 1.625 would be the first logical upside target, with 1.739 hanging overhead.