Boohoo (BOO) share price has come under renewed selling pressure as rival Asos experiences stock woe.
According a report on Sunday Times (Nov 21), Asos is reported to be ‘deferring orders from suppliers as the supply-chain crisis wreaks havoc in the run-up to Christmas.’ This bodes ill for the online fashion company. Unsurprisingly, Asos’s stock was down by more than 2.5 percent in today’s trading. Sellers also took advantage of the Asos news to sell Boohoo’s stock.
However, what’s happening in Asos may not necessarily translate directly to Boohoo’s operation. Meanwhile, Black Friday is nearing and Boohoo may do well out of the pre-Christmas trading season.
Boohoo’s price trend is oversold and according to Boohoo’s interim results, the company is not experiencing a massive sales slowdown. In fact, the £2.4 billion retailer has gone on the offensive earlier this year by splashing out for a few brands (Dorothy Perkins, Wallis etc) to increase its market share. It is building new warehouses.
At the time of writing, Boohoo’s share price trades down 2 percent at 187p.
Boohoo’s (BOO) share price has nosedived over the past few months.
Prices have fallen in the region of 50 percent from its February peak. This is a drastic decline, perhaps overly so.
Boohoo’s downtrend is now oversold; sentiment too bearish. We are not surprised to see buyers stepping in at around the 180p mark to create a short-term floor.
Looking at Boohoo’s longer-term chart, additional support is noted near 160p. So the stock has a layer of support zones below current prices. These technical observations lend support to the view that Boohoo’s is developing a base formation with the potential for a counter-trend rally back into the 220-240p area.
While Boohoo’s share price is going downhill, its results aren’t too bad.
According to its latest interim results released at the end of September, in the six months to August the fashion retailer saw its revenue rise by 20 percent to £975 million. However, due to the acquisition and integration of some fashion brands, net profits have declined to £63.8 million. Boohoo’s gross margin is at a high 54 percent.
Compared to a year ago, more analysts have rated the stock as ‘Outperform’. According to the Financial Times, 14 analysts (out of 23) are rating Boohoo as ‘Outperform’. This is doubled the number back in November 2020.
The median price target is at 345p, which is significantly higher than the current share price.
