​​WH Smith in cautious mood ahead of update

​​​WH Smith in cautious mood ahead of 9 November earnings

​WH Smith reported a significant increase in annual revenue at its most recent update, driven by strong demand during the busy summer travel season. However, the company fell short of its recently raised profit forecast.

​The leisure travel sector has experienced a surge in demand since the easing of pandemic restrictions, leading to a global boom during the summer holiday period. Despite this positive trend, the sector continues to face challenges such as high costs and reduced passenger spending due to economic uncertainties.

​WH Smith had previously predicted higher full-year profit, citing a recovery in passenger numbers across its key markets. However, analysts now expect the company's profit before tax to reach an average of £143 million ($179.91 million) for the year, according to a consensus compiled by the company.

​While the increase in revenue is undoubtedly a positive development for WH Smith, the shortfall in profit highlights the ongoing difficulties faced by the travel sector. The company's performance reflects the broader challenges of balancing increased demand with rising costs and a cautious consumer environment.

​As the global economy stumbles through the aftermath of the pandemic, it is crucial for companies in the travel sector to carefully manage their operations and adapt to changing market dynamics. This includes finding ways to control costs while still providing a compelling offering to passengers. The ability to strike this delicate balance will be key to the sector's recovery and long-term success.

​Analyst ratings for WH SMITH

​Refinitiv data shows a consensus analyst rating of ‘buy’ for WH SMITH – 2 strong buy, 9 buy and 2 hold - with the mean of estimates suggesting a long-term price target of 1,864.17 pence for the share, roughly 56% higher than the current price (as of 06 November 2023).

​Technical outlook on the WH SMITH share price

​WH SMITH’s share price has been in the doldrums for much of the year with its share price slipping by around 22% year-to-date or by over 30% from its 1,729p February peak.

​WH SMITH Weekly Candlestick Chart

​The WH Smith share price is trying to find support slightly above its 1,110p October 2022 low, having last week slipped to 1,134p before attempting to bounce. Failure at 1,110p on a weekly chart closing basis could lead to levels last traded in November 2020 being reached with the psychological 1,000p mark representing a possible downside target.

​Earlier today the WH Smith share price tested its upper downtrend channel line at 1,223p. While it caps, immediate downside pressure should be maintained.

​WH SMITH Daily Candlestick Chart

For a bullish reversal to become likely a rise and daily chart close above the 9 October high at 1,305p would need to be seen, some 10% above current levels (as of 06 November 2023). While the share price remains below it, the May-to-November downtrend remains firmly entrenched.