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ITC share price: Edelweiss Wealth sees 80% upside in long term

ITC share price: A strong upside move of prices on the ratio chart of ITC/FMCG suggests a strong out performance by the stock in the sector. (MINT_PRINT)Premium
ITC share price: A strong upside move of prices on the ratio chart of ITC/FMCG suggests a strong out performance by the stock in the sector. (MINT_PRINT)

  • ITC share price is on the cusp of a breakout from an inverted head and shoulder pattern (strong trend reversal), which shall be validated on a weekly close above 253, believes Edelweiss Wealth research report

ITC share price has given sharp upside bounce in year-to-date (YTD) time that indicates bulls' attraction towards the Indian conglomerate company's shares. After tepid 12 per cent return in last one year, Edelweiss Wealth is highly bullish on ITC shares. The Edelweiss Wealth research says that there is strong possibility of trend reversal and the stock may go up to 450 apiece levels in long term. ITC share price today is 249.95 per share levels on NSE.

Speaking on the reason for being bullish on ITC shares; Edelweiss Wealth research report said, "A strong upside move of prices on the ratio chart of ITC/FMCG suggests a strong out-performance by the stock in the sector. Prices on the ratio chart suggest a base formation hinting towards the start of a strong out-performance by the stock. A probable formation of an inverted head and shoulder pattern on the weekly charts and a time series analysis on the quarterly chart indicate a change in trend and resurgence of the super bull cycle." The report went on to add that ratio chart on a P&F platform indicates a strong base building formation underway since two years.

Expecting fresh breakout in ITC share price in coming session; Edelweiss Wealth report said, "ITC is on the cusp of a breakout from an inverted head and shoulder pattern (strong trend reversal), which shall be validated on a weekly close above 253. Price action on the long-term chart (quarterly) shows every time the stock corrects or consolidates for 14–16 quarters, a fresh uptrend resumes. ITC has been in consolidation since the last 15 quarters, with the current quarter being the 16th one. A quarterly close above 253 implies the highest closing the stock will record in two years."

On fundamentals that may fuel ITC share price rally; the wealth research report said, "We expect the volume in cigarettes to revive at a CAGR of 5 per cent during FY22–24E as against a CAGR of -1 per cent during FY11–21; FMCG’s EBITDA margin to scale up to higher single digits; and the hotel, paperboard and agri-commodities businesses to revive. This will lead to an earnings CAGR of 12 per cent in FY22–24E against a mere 7 per cent in the last five years."

On its suggestion to positional investors in regard to ITC shares, Edelweiss Wealth research report has recommended stock market investors to buy ITC shares at current levels for long term target of 450 maintaining stop loss at 220 apiece levels.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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