Is This Good Time to Buy Oversold Stock?

Tapestry (TPR) stock price began its bullish rally at the start of May after the $37 support level was formed. The stock price surged approximately 20.40% from the support level and faced strong rejection near $45.

After the rejection, the TPR stock price fell and broke the $37 support level. The downfall was fueled by the news about Tapestry spending $8.5 Billion to acquire Capri Holding.

The quarter 4 earning report also catalyzed the momentum, which pushed prices further downward. TPR stock fell after reporting Q4 adjusted earnings per share of $0.95. weaker than the consensus estimate of $0.97. The retail company also forecasted the 2024 adjusted EPS of $4.10-$4.15, below the consensus estimate of $4.22.

If the bearish momentum continues, TPR stock may fall to the following critical support level of $27.50. On the other hand, if the stock price can form a support at $28, it may try to retest $30.

Why Did Tapestry Fall After The News Of Acquiring Capri Holding?

On August 10, Tapestry announced that it would spend $8.5 Billion or $57 per share – to acquire its rival Capri Holding, owner of Versace, Michael Kors, and Jimmy Choo. The deal will provide Tapestry, the guardian of Coach, Kate Spade, and Stuart Weitzman, control over Versace, Michael Kors, and Jimmy Choo.

Wall Street began to question the need to pull the trigger. CEO Joanne Crevoiserat stated, “This combination expands our global reach.” The news led to a surge of 59% in Capri Holding stock.

The purchase marks a 39% premium on the closing price of Capri Holding’s stock price. About $200 Million in cost synergies are expected by the next three years after the deal closes. The acquisition deal is expected to close in 2024. The deal will be funded through new debt and cash on the balance sheet.

Will Downfall Continue for TPR Stock?

The stock price has plunged below 20, 50, 100, and 200-day exponential moving averages, suggesting bearish solid momentum. The Chaikin money flow score also dropped below the 0 mark and currently stands at -0.25, indicating weakness in the market.

The relative strength index has been hovering in the oversold zone since September 5 and currently stands at 17.84 with no signs of reversal or short-term pullback. The Bollinger bands have also contracted, indicating a decrease in volatility.

Conclusion

Once the acquisition is completed, Tapestry will be among the most prominent luxury brands; comparable to Louis Vuitton (LVMH). However, TPR stock is currently in a strong downtrend, and traders should wait for a strong support formation before investing.

Technical Levels

Major support: $27.50 and $26.50

Major resistance: $45 and $37

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.