logo-loader
viewASOS PLC

Online fashion group ASOS back on track, says Barclays, which starts coverage

Barclays said that after a “year of pain” in 2014, ASOS is back on track...

151118_Asos_Shot_12_059.jpg
Barclays said that after a “year of pain” in 2014, ASOS is back on track

Barclays Capital on Friday initiated coverage of the online fashion retailers with a bullish assessment of ASOS plc (LON:ASC).

It rates the shares, up 81% in the last year, ‘overweight’ and has set a bullish £66.30 target - more than ten quid higher than the current price.

Barclays said that after a “year of pain” in 2014, ASOS is back on track, although it concedes that currency movements have been a big, positive “swing factor” in the recent results.

“Whilst there are still execution risks, we are confident that the benefits of technology and warehouse spend have further to run and believe that ASOS can gain share at a faster rate than the market expects,” the bank said in a note to clients.

“We are also comforted that investor expectations on margins have rebased, and we don't think margin expansion is needed for the stock to go up: the value of the company is driven by the ability to build its moat today, which in turn flows into a conversation on midterm revenues and margins.”

At 10am, the stock was changing hands for £55.70, up 1.2%.

In the same circular, Barclays looked at the potential of ASOS’s rival Boohoo.com PLC (LON:BOO), which it rates ‘equal-weight’.

It says “expectations are high and stock looks expensive” on an enterprise multiple of 30-times and an eye-watering 51-times earnings.

“Can the momentum continue?” Barclays asked.

“We think Reuters consensus numbers could still move meaningfully higher in full-year 2018, and we do not yet think an upside case for earnings is fully reflected in the shares.

“Given outstanding recent execution, it is still too early to conclusively call an end to the positive estimate momentum trade.”

However, the bank’s retail analysts remain in a holding pattern with Boohoo pending guidance on the recent acquisition of US site Nasty Gal.

It will wait until the prelims on April 26 before re-evaluating its view on the stock.

The shares, up 274% in the past year, are currently changing hands for 153p each, valuing the business at £1.7bn.

ASOS is worth £4.7bn, which if the company wasn’t listed on the lighter-touch AIM market, qualify it for inclusion in the FTSE 100.

Quick facts: ASOS PLC

Price: 1060 GBX

AIM:ASC
Market: AIM
Market Cap: £889.96 m
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Australian gold producers making 'excellent margins and may start to hedge'

Alto Capital's Tony Locantro says he can see a great deal of volatility ahead for the gold price. He adds that once we're out the other side of this current health crisis the participation rate in gold is going to increase. ''Australia gold producers are making excellent margins and I...

2 days, 17 hours ago

2 min read