Investors in Halfords (LSE:HFD) shares have had a good run since the start of the year, but it is starting to look like a game of two halves for this retailer. This was very much a phase 2 recovery stock and a direct beneficiary of the UK government’s roll out of vaccinations and the decision to open up retail gradually.
The Halfords share price responded accordingly, up from 271 in late February, shares were trading at close to the 400 level by late April. Investors who got in quickly in late February saw most of the action as the shares have largely run out of steam in May, prompting questions about whether there is more to come from Halfords, or whether it is running out of momentum now?
Halfords shares have come a long way in six months
The stock has come a long way – you are still looking at a 52 week low of a staggering 130 and at time of writing they were priced in London at 399. There was a spike to the 52 week high of 439 quite recently, but that was short-lived. Still, it proves that the 400 level is not an unbreachable level, just that there are many investors who will sell above 400 and obviously see 400 as fair value for Halfords right now.The price spike came as Halfords reported an increase in profits and revenue, with overall revenue up at £1.29bn in the 52 weeks to 2 April 2021. this is up from the £1.14bn it reported in the middle of last year. Underlying profits before tax were £96.3m, also up substantially, and profits nearly tripled.
“It was a year in which Halfords’ transformation into a service-led business was rapidly accelerated, and we were particularly pleased to achieve a record revenue performance in the strategically important area of motoring services,” said CEO Graham Stapleton. “We have continued to increase our scale and capacity in this area and customers can now receive our services at almost 800 fixed locations, or at home from one of our 143 mobile expert vans.”
Investing in a future dominated by EVs
Of more interest to The Armchair Trader was that Halfords is investing in a transition to an electric vehicle future, with more training and technology. This should stand the company in good stead going forward. Over 2000 employees are receiving training in how to service electric vehicles and bikes.
It mystifies us why investors want to part with Halfords shares right now, especially if you were holding them in Q1, but some obviously have. The stock is still looking competitively priced. The results seem to have come in largely where analysts were expecting them to arrive. There was focus on whether Halfords would restore a dividend, which it has duly now. It is also reporting soaring sales of electric bikes and could be well positioned for further strong EV demand in 2022.
But yes the stock price looks rangebound at the moment. We think that there are still a lot of short term investors and tactical traders long this one and likely ready to shed shares when the price moves above 400. The stock has lost its momentum and there is less scope for further upside over the summer, as far as we can see.
