Boohoo, the renowned fashion giant, has recently shared its latest full-year results, signalling a turning point for the company. Analysts are optimistic, encouraging investors to consider purchasing Boohoo shares, noting that the company’s most challenging times are likely behind it.
Despite grappling with many challenges amid the pandemic, including supply chain disruptions and surging costs, Boohoo has provided significant reassurances in its recent results. Even though the company reported a pre-tax loss of £91m, it still garnered a positive response from market experts at Panmure Gordon.
In addition to urging investors to acquire shares, these analysts have raised their target price from 60p to 70p, showing their confidence in the company’s future. At present, Boohoo’s shares are being traded at 43p, reflecting a market capitalisation just shy of £550m.
Analysts Tony Shiret and Georgia Pettman from Panmure Gordon highlighted several positive indicators in Boohoo’s preliminary reports. They mentioned the evidence of stabilization and control, prompting them to shift their stance. They also noted Boohoo’s move to a more transparent buying model, indicating the company’s capacity to drive sales effectively. The duo also highlighted the new US distribution centre’s importance in boosting US sales.
While admitting some short-term weaknesses and execution risks, particularly with the new US distribution centre, they suggested that Boohoo’s future seems promising. The company’s ability to invest falling input costs into price gives it a buffer against demand pressures. Furthermore, they believe that Boohoo’s medium to long-term prospects could be robust as the company navigates a more favourable supply chain environment.
These experts noted that Boohoo’s medium-term goals of achieving double-digit sales growth and an EBITDA margin of 6-8% would require further explanation and demonstration. However, they see plenty of near-term upside due to the strong reassurance provided by these results and the management’s increasingly positive demeanour. Lastly, they pointed out that Boohoo is gradually demonstrating a superior business model and investment traits compared to its troubled competitor, Asos.
