ASOS stock gained after an analyst upgraded the stock, saying investors haven’t been giving the web fashion retailer enough credit for recent stellar sales numbers.
ASOS hasn’t been a simple investment since the U.K. online fashion retailer issued a profit warning in 2018, but investors should provides it credit for a recent effort to show things around, say analysts at Berenberg.
ASOS has crawled back from an awful year, and it's time for investors to believe the U.K. online fashion retailer.
So say Berenberg analysts, who upgraded the stock to shop for from Hold on Monday, with a price target of 4,200 pence ($54.33) a share. that's nearly 22% from 3,460 pence, where the stock was trading on Monday.
The group’s “performance over peak trading, which demonstrated the resilience of the new logistics infrastructure, along side our extensive conversations with the corporate , has restored our confidence,” a team of analysts led by Michelle Wilson said during a note to clients.
Last month, ASOS posted a 20% rise in sales for the four months ended Dec. 31. The stock had a rough ride in 2019, stemming from a profit warning in 2018. The shares are up 2.3% year so far and 14.8% higher over 12 months, but remains faraway from a 2018 peak of quite 7,000 pence.
Photograph: Rui Vieira/PA Wire
ASOS is additionally trading at a deep discount to its European e-commerce rival Zalando, the analysts noted.
Wilson says it’s important for investors to know that ASOS’s tough time wasn't thanks to flagging consumer sentiment or rising competition, but rather capacity constraints.
With the new infrastructure holding up overflow peak trading and brand positioning back on target , along side a ramp-up in U.S. marketing and a strengthening of the management team, we believe the recent re-acceleration in revenue growth is sustainable.
said the analysts.
The current valuation of the stock also implies only a limited recovery in margins for ASOS, the analysts said, remarking several factors they said the market isn’t appreciating immediately . On the list are supplier renegotiations, shipping cost leverage from localized distribution centers, warehouse efficiencies, and nonstrategic cost savings.
We view this as a compelling entry point for ASOS with operational problems with 2019 now behind it, but still within the price,”
said Wilson and therefore the team.
Once the market starts to believe what it’s beginning to see within the retailer, shares may catch up quickly.
Shadrach is a Trending Journalist. His first job was as a newsreader and journalist at an award winning magazine. He spends most of his time scouring the internet for the hottest topics to share with his readers.