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Citigroup cuts target for ASOS as online fashion retailer faces margin challenges

“Given the similar growth profiles, along with better cashflow profiles and stronger balance sheets, we prefer Zalando and boohoo on the European apparel e-commerce space,” the analysts said

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In lunchtime trading, ASOS shares fell 1.13% to 6,106.00p

ASOS PLC (LON:ASC) shares fell on Thursday as Citigroup cut its price target to £70.00 from £77.50 and re-stated its ‘neutral’ rating, saying that online fashion retailer faces margin challenges.

In a note to clients, analysts at Citigroup said that the fall in ASOS share price following news that US states can force internet retailers to collect state sales tax, even in states where the retailer or seller has no physical presence, is overdone.

READ: Online retailer shares pressured by change in US online tax regime

However, the analysts think that group margin targets are “challenging” and its balance sheet position “creates risk”, and ASOS will be free cash flow negative until at least financial year 2020, with net cash of only £40mln and a debt facility of £150mln.

Citygroup’s analysts said: “Given the similar growth profiles, along with better cashflow profiles and stronger balance sheets, we prefer Zalando and boohoo on the European apparel e-commerce space.”  

In late-morning trading, ASOS shares fell 1.13% to 6,106.00p.

 

Quick facts: ASOS PLC

Price: 5356 GBX

AIM:ASC
Market: AIM
Market Cap: £5.35 billion
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