Centrica share price rally has more room to run

Centrica (LON: CNA) share price has surged to the highest level since April 2019 as the company’s fundamentals improve. The stock surged to a high of 97.70, which was about 231% from the lowest point in 2020. Its market cap has surged to over 5.7 billion pounds.

Energy business is booming

Centrica is a leading British company that is best known for its brand, British Gas. It also operates other brands like PH Jones, Hive, Local Heroes, and Bord Gais Energy among others. The company serves millions of customers in the UK and other countries.

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In a statement on Thursday, the company said that its full-year earnings will increase by about 8 times helped by higher prices. It expects that its adjusted earnings per share wil be more than 30p when it publishes its results in February. 

Centrica has been under intense pressure in the UK where inflation has surged. Critics point to corporate greed, which has seen it boost its profits at a time when households are hurting. Its CEO decided to give up a 1.1 million pound bonus. 

The company also implemented a 250 million pound share buyback in 2021 even as the government has implemented a windfall tax. Analysts believe that the firm will pay north of 700 million pounds in these taxes.

Still, it is unclear whether Centrica’s business will be robust in 2023 as it was last year. Besides, natural gas prices have plunged in the past few months because of the warm winter. Also, the business catalysts that pushed its profitability higher in 2022 could reverse in 2022. 

Analysts have a bullish outlook for the Centrica share price. The average target of City analysts is 126p, which is higher than the current 98p. Those at Royal Bank of Canada (RBC) expect that the stock will rise to 130p while those at Citigroup, Barclays, and JP Morgan believe that it will rise to above 110p.

Centrica share price forecast

CNA stock chart by TradingView

Is it safe to buy Centrica stock? The daily chart shows that the CNA share price made a bullish breakout this week. It managed to rally above the important resistance point at 97.32p, which was the highest point in December. The shares also rose above the important level at 94.04p, the highest level in July. 

They have also invalidated the double-top pattern that was forming. Therefore, the stock will likely continue rising in 2023 as buyers target the key resistance at 130p. However, the stock could also show some volatility because of gas prices.