Undervalued opportunity

The current Boohoo share price is 93p. At this price, the stock trades on a price-to-earnings (P/E) ratio of just under 20. This might not seem cheap, but I still think the shares may hold some great value, especially when considering the future growth of the company.

As my fellow Fool Rupert Hargreaves points out, Boohoo has seen earnings grow at an average of 46% per year for the past seven years. If we assume the firm can continue to grow at a more conservative 10% for the next 10 years, it would hypothetically report earnings per share of about 15p in 2032. Assuming this, if the stock were to achieve industry average multiples — around 13 for the online fashion retail space — it could be worth 195p. This theoretical growth seems very enticing to me.

Looking at Boohoo’s close competitor H&M, I also see value. H&M trades on of a price-to-sales (P/S) ratio of 1.23, which is over double the Boohoo P/S ratio of 0.6. This further backs up my thesis that Boohoo’s shares may be undervalued.

Headwinds for the Boohoo share price

Although the share price does look cheap, there are a few concerns I have moving forward. The most pressing concern is some of the workers’ rights issues that have surrounded the firm in recent years. For example, in 2020, a Guardian report highlighted workers creating Boohoo garments being paid well below minimum wage. While the firm has recently taken steps to prevent such activity, these scandals have undoubtedly left a stain on the Boohoo brand name.

Another risk that I see affecting the share price in the short-to-medium term is the threat of rising interest rates. Both the US and the UK raised their rates last week to 0.25% and 0.75% respectively. When rates rise, investors tend to dump higher-risk growth stocks such as Boohoo. As the trend towards rising rates continues, the Boohoo share price could slide further.  

What I would do now

In my opinion, the current price does look cheap to me, especially considering it’s down over 70% from a year ago. However, if there’s one thing I’ve learned throughout my retail trading career, it’s that facts always trump hypotheses. While the shares might look cheap on paper, the risk of rising inflation and the branding scandals are both concrete factors. Therefore, I won’t be buying any Boohoo shares for my portfolio today.  

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Does a massive 36% jump in the Boohoo (LSE: BOO) share price over the last five trading days (to yesterday’s close) mean the worst is over for battered and bruised shareholders like myself? Although I’m only whispering it as things stand, I believe it is.

Chinks of light

Perhaps the most obvious reason for the sudden uplift in shareholders’ fortunes is the unexpectedly positive trading update released by the Manchester-based business earlier this month.

As a reminder, net sales growth of 7% was logged for the fourth quarter. This rises to 14% for the year to the end of February. That may seem rather low for a former market darling. However, one needs to remember that Boohoo was a major beneficiary of global lockdowns. It was somewhat inevitable that performance would moderate. Many other listed firms would likely welcome such numbers with open arms.

It wasn’t all rosy. The company saw higher return rates in Q4 compared to the same period in the previous year. And while trading continues to be reliably strong at home, international performance has been held back by supply chain pressures. Consequently, customers have been waiting longer for their clothes to arrive.

So, has the Boohoo share price bottomed?

There are certainly a few reasons for thinking that the worst might be over.

Boohoo now expects to report adjusted earnings before tax, interest, depreciation and amortisation (EBITDA) of roughly £125m. Importantly, this is in line with the (revised) guidance set by management last December. In other words, expectations are now matching reality. On top of this, a P/E of just 16 looks too low for a company that now boasts 13 or so brands, solid finances and plenty of social media savvy.

At no point have I ever believed any of Boohoo’s existing problems to be permanent either. Supply chain issues will be smoothed out, helped by a new US distribution centre in 2023. Concerns over the working conditions in factories will also be laid to rest. This is assuming, of course, that the company follows through to the letter on its commitment to address previous oversights.

Shorters attack

It’s important to put things in perspective though. Despite rising strongly in the last few days, the Boohoo share price is still over 70% below where it stood this time last year. That’s an awful lot of ground to make up, even if a resolution to the crisis in Ukraine does light a fire under UK stock prices.

Perhaps tellingly, the AIM-listed company remains a target for short-sellers (those betting the Boohoo share price will fall) according to shorttracker.co.uk. Some of this pessimism may be due to the company already stating that higher return rates are expected to continue for the first half of the new financial year. The rise and rise of competitors such as Shein might also be playing a role. Higher living costs and the subsequent squeeze on discretionary budgets can’t be helping either.

Turning point

Notwithstanding this, I’m increasingly confident that the last few days may represent the turning point in Boohoo’s fortunes.  A lack of news until full-year numbers are officially confirmed (4 May) could see some profit-taking, but I won’t be selling a single share. I reckon we’ve already seen the bottom. 

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

ESG concerns

The firm’s business model rests upon the speedy design, production, and advertising of its products – fast fashion. This allows high volumes of garments to be created for low costs to the consumer. While this may sound promising on paper, Boohoo has been embroiled in numerous worker scandals as a consequence.

For example, in September 2020, a report by the Guardian indicated that workers at third-party suppliers were earning well below minimum wage in addition to enduring poor working conditions. The firm was also subject to a class-action lawsuit after being accused of misleading advertising in the US. In my opinion, these are some of the key reasons why investors have turned sour on Boohoo shares.

Another headwind Boohoo is going to have to contend with in the coming months is the threat of rising inflation. As prices rise across the world, it could pose a serious risk to Boohoo’s low-cost, high-volume operations. And supply chain issues have already impacted the firm, leading to 10-day delivery times to the US, which is a vital sales region for Boohoo.

In addition to this, the 2021 Q3 results, released in December 2021, have highlighted that the firm’s pre-tax margin outlook has been lowered from 9% to 6%. Factoring in tax, these margins will shrink further. Falling margins lead to reduced profitability which is the last thing Boohoo needs.

Reasons to be cheerful about Boohoo shares

Yet one reason that Boohoo shares do appeal to me, is the fact that the firm owns a pretty impressive arsenal of brands. It acquired a number of these retailers out of administration in 2021, the largest of which was Debenhams. In addition to this, its US distribution centre is expected to open in 2023, significantly expanding operations in the region. The US contributed to a quarter of revenues in 2021, so this seems like a great move to me.

Couple this expected future growth with the current price-to-earnings ratio of just 9.3, and Boohoo shares do look attractive to me. Perhaps the current share price could offer me a discounted entry position for future growth.

What I’m doing now

Yes, Boohoo shares are cheap, and the firm has some exciting plans ahead. However, I think that short-term rising costs could place a huge strain on the firm this year, especially considering its low margins. In addition to this, the ESG concerns are a big moral red flag for me. Therefore, I won’t be adding Boohoo shares to my portfolio any time soon.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Boohoo (LSE: BOO) share price fell an astonishing 66% in 2021. Today, I’ll take a closer look at what happened and why the market has seemingly fallen out of love with the fast-fashion giant.

It all started so well

Holders of this stock must have been being optimistic as they entered 2021. At the beginning of last year, the Boohoo share price was riding high at 340p.

An encouraging trading statement in January went some way to justifying this momentum. Strong growth across all its brands and geographies in the last third of 2020 was reported. Accordingly, the company raised its guidance on full-year revenue. News later in the month that Boohoo had snapped up a number of brands, including Debenhams, was also positively received.

In March (and facing a potential US import ban), Boohoo was once again forced to defend its supplier practices. The AIM-listed firm published a list of 78 approved manufacturers as part of its ‘Agenda for Change’ programme. After a slight dip, the share price duly recovered, helped by news of a new warehouse that would boost sales capacity to above £4bn.

The Boohoo share price starts to tumble

It’s at this point that cracks began to appear. Helped by the rise in online shopping over the pandemic, full-year results in early May showed a 41% jump in revenue to £1.75bn. A 37% rise in core earnings to £173.6m was also reported.

Away from the headline numbers however, Boohoo said the the benefits of reduced returns seen over the pandemic would now lessen, but higher costs were here to stay. The company’s decision to maintain guidance in June’s trading update (despite sales rising 32% in Q1) also pointed to management becoming increasingly cautious on the firm’s near-term outlook. 

As the months passed, a significant minority of investors appeared to be growing frustrated with the company’s founders. No less than 12% of shareholders opposed the re-election of Carol Kane to the board. A statement that the online fashion retailer would be investing £500m in the UK over the next five years did little to appease owners.

The worst was yet to come. In September, the Boohoo share price fell sharply as it warned that previously-highlighted higher costs in its supply chain and higher wages for its workers would impact margins. This was followed by a lowering of full-year guidance in December’s (unexpected) trading statement. As expected, more clothes were being returned by customers. A serious slowdown in sales abroad, issues with deliveries, and ongoing cost inflation were also blamed. Omicron wasn’t helping matters.

Boohoo briefly became a penny stock when, in mid-December, the shares dipped to 97p. They had not been this low since September 2016. Perhaps the only crumb of comfort to holders was that industry peer ASOS was also ending the year firmly out of favour.

More news soon?

As things stand, analysts believe earnings per share will fall by 23% in the current financial year. This would leave Boohoo’s stock on a P/E of 20. Whether that proves to be a bargain for long-term investors remains to be seen. 

Based on past form, the £1.5bn-cap may provide the market with another update on trading later this month. Should this be the case, The Motley Fool UK team will be on hand to update readers.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Boohoo (LSE: BOO) share price has had an awful 2021. Following today’s trading update, it just got even worse. Now down 66% year-to-date, it’s hard to come across many people with a good thing to say about the former market darling. In fact, something’s come to my attention that suggests things might get even worse before they get better. 

Boohoo share price: attack of the shorters!

According to shortracker.co.uk, the number of short-sellers targeting Boohoo has increased significantly.

Short-selling (betting a share price will fall) is a risky business. While the gains from betting long on a stock are technically infinite, there’s always a limit to the extent these traders can profit. In other words, a share price can’t go below zero. This makes it important for any shorter to be extremely confident in their view that Boohoo will continue to struggle.  

At this point, it’s worth highlighting that the fast-fashion giant is far from being the most shorted stock on the UK market. That dubious accolade (justifiably) goes to heavily-indebted Cineworld. However, Boohoo is now 13th on the leaderboard, not far below battered FTSE 100 member International Consolidated Airlines.

Buy, sell, or hold?

As a shareholder, it goes without saying I haven’t enjoyed Boohoo’s recent form. The emergence of a significant minority of short-sellers is another headache. Having said this, I’m not intending to sell for a few reasons. 

First, Boohoo has survived such selling pressure before. Back in May 2020, hedge fund ShadowFall claimed the company was overstating its profits and cashflow. These allegations were quickly refuted and shareholders regained their composure.

Second, many online retailers are struggling right now. Industry rival, for example, ASOS continues to suffer. Lockdown beneficiary AO World has fared even worse. So it’s simply not the case that everyone else is getting richer while Boohoo’s owners suffer.

Third, if sentiment is already low, it takes just a bit of better-than-expected news to generate a ‘short squeeze’ where those betting against a company rush to close their positions. This can often put a rocket under a share price.

Lastly, I’ve made a point of being sufficiently diversified elsewhere not to make selling my holding at (possibly) the worst time even necessary. Successfully mitigating risk in tis way is key to staying in the investment game and applies to all my holdings.

No guarantees

Perhaps I’m just biased. There’s no rule to say the Boohoo share price won’t fall even further, especially after today’s statement.

While demand in the UK looks steady, overall net sales only rose 10%  in the three months to 30 November due to a much higher amount of clothes (particularly dresses) being returned. Performance abroad has also suffered from longer delivery times/higher costs. As a result, Boohoo is now guiding full-year net sales growth of between 12% and 14%. That’s a big reduction to the 20% to 25% previously expected.

Worrying as all this is, these numbers (and the presence of shorters) merely confirm what we already know: times are tough and this company is firmly out of favour. And, seen through a long-term lens, the best time to buy a company is often when things look bleak.

With its growing portfolio of brands, huge overseas growth potential, new distribution network and strong finances, I’m cautiously optimistic Boohoo will rise again.

Will I sell? No. Hold? Yes. Buy more? Possibly.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fast fashion multi-bagger

The penny stock in question is Sosander (LSE: SOS). Providing “a one-stop online shop for style-conscious women who have graduated from price-led alternatives”, the company also boasts brand partnerships with FTSE 100 firm Next, FTSE 250 member Marks & Spencer, and John Lewis. Just like the aforementioned Boohoo and ASOS, Sosander makes full use of data analysis to gauge which products it should prioritise and the best ways of reaching its target audience. 

Despite only being around since 2016, the company was listed on AIM only a year later. Performance since then has been somewhat erratic. For example, the share price went from 45p in September 2018 to just above 5p when the first UK lockdown was announced. However, anyone brave enough to buy this penny stock back when the chips were down will have done extremely well. Since March 2020, the valuation has climbed roughly 560%!

Based on today’s half-year numbers, I think there could be even more upside ahead.

Sales soar at this penny stock

At £12.2m, revenue rocketed no less than 184% in the six months to the end of September. To put this in perspective, that’s more than in the whole of the previous financial year. Gross profit came in at £6.9m — up more than 200% — and gross margin hit a superb 56.5%.

Other positives include the number of active customers over the six months soaring by 41% to over 191,000. This suggests that co-CEOs Ali Hall and Julie Lavington have got their marketing strategy spot on. 

Like many penny stocks, Sosander remains loss-making. However, an EBITDA (earnings before interest, tax, depreciation, and amortisation) loss of just under £1m is lower than the £1.02m seen last year. In other words, things are going in the right direction. In fact, the Wilmslow-based business revealed that it was EBITDA positive in both October and November as shoppers snapped up partywear, outerwear, and knitwear. 

No sure thing

Perhaps unsurprisingly, Sosander stated that it was trading ahead of current analyst expectations for the full year. Unfortunately, the share price is barely up as I type. I think this is most likely due to traders being caught off guard by suggestions that existing vaccines may not be all that effective against the new Covid-19 variant. On another day, the reaction might have been a lot different.

Even so, it’s worth bearing in mind that Sosander is hardly a risk-free proposition. Although the company had seen “no material impact” from supply chain disruption so far, things could easily get worse before they get better. I’m also minded to remember that, pandemic or not, the £75m cap operates in a highly competitive industry where, I imagine, brand loyalty is increasingly hard to secure.

My verdict

No one can say for sure what will happen next with Covid-19. As promising penny stocks go, however, this is definitely one I’ll be adding to my watchlist. If general market sentiment dips again over December, I may just need to make room for Sosander in my portfolio.

The post This penny stock is putting Boohoo and ASOS to shame! Time to buy? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Revenue and profit jump

Unfortunately for existing holders, here’s where the good news ends.

CEO departs

In a separate statement today, ASOS revealed that CEO Nick Beighton would be leaving the company with immediate effect. A search for his successor is now underway.

Clearly, all companies will periodically require new leaders/fresh blood. After 12 years at ASOS (and six leading it), Beighton’s departure isn’t entirely unexpected. For its part, the company reflected on wanting to have the best team in place to target annual revenues of £7bn within three to four years and become “one of the few truly global leaders in online fashion retail”.

If this were the case, however, you would think that a new CEO would already be waiting in the wings. The fact that no one has been lined up is disappointing, in my view.

ASOS share price: a warning?

Despite recovering slightly, the ASOS share price is down a bruising 10% as I type. This means the company’s value has nearly halved in 2021 so far. In the last 12 months, it’s down a staggering 53%.

Things could easily get worse in the months ahead. Supply chain pressures won’t go away quickly. In fact, the company believes that this issue will lead to “mid-single-digits” revenue growth in H1. 

When this headwind is combined with further investment and a return to normal returns rates, full-year pre-tax profit is now predicted to between £110m and £140m. Achieving the lower number would represent a near-40% decline. Seen from this perspective, I’m not surprised the ASOS share price has tumbled again.

My verdict

I’ll hold my hands up and say that I thought ASOS already presented as a potential bargain before today. Although no one can reliably predict where share prices will go in the near term (not to mention accurately call a management merry-go-round), my timing was clearly off.

Even so, I continue to believe that the fragility of the ASOS share price is ideal for patient growth investors who can march to their own beat. Despite the departure of its CEO, this remains a good business with £200m in net cash, a huge following and a sound strategy for growth (including the acquisition of Topshop and a partnership with Nordstrom). 

Were it not for the fact that I’m already heavily invested in rival Boohoo, ASOS would probably top my shopping list today. The sector sell-off looks overdone, in my opinion. As things stand, however, I’ll remain on the sidelines for now.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Next month will see online fashion giant Boohoo (LSE: BOO) release its latest set of interim numbers. Will these be good enough to help the share price recover and possibly soar? As a holder, I’m certainly hopeful. So, let’s look at why this may and, importantly, may not happen. 

Boohoo share price: ready to rise?

My first reason for thinking the Boohoo share price may be about to rebound relates to current trading.

Assuming that its customers have swapped lockdown threads for party clothes, I wonder if September’s results may prompt an increase in full-year guidance. Boohoo has developed a habit of under-promising and over-delivering over the years but chose not to raise targets when it reported on Q1 trading a few months ago. Now that we’re all free to socialise once more, I’m optimistic it could surprise on the upside again.

There have certainly been indications that business is still booming. Earlier this month, the company announced that it would be investing £500m in the UK over the next five years. In addition to employing 5,000 more people, Boohoo said that it would be further investing in warehouse space and technology. If that’s not indicative of a business in rude health, I don’t know what is.

Tempting valuation

Another reason for thinking the stock might rally is that the company’s valuation has fallen too far. The Boohoo share price is down 17% year-to-date. Based on analysts’ projections, that leaves this top growth stock trading on 26 times earnings.

That’s not exactly cheap. However, BOO also has a price-to-earnings-growth (PEG) ratio of just above 1. Anything around or below this level suggests investors like me are getting a good deal for our money. And with all its recently acquired brands giving access to new markets (such as homewares and cosmetics) and customers, I really don’t think expansion will be an issue.

I’m clearly not alone in thinking that Boohoo should bounce back strongly in time. Non-executive director, Iain MacDonald, bought over £300,000 worth of stock (at a higher price) back in June. It’s surely a good sign when those with an intimate knowledge of the company are investing their own cash.

The flip side

For balance, it’s vital to briefly consider what things may continue to hold the Boohoo share price back. 

There’s a possibility that recent trading may actually disappoint. After all, rival ASOS tumbled back in July after announcing a slowdown in sales. Boohoo could conceivably do the same. Whether this happens or not, confirmation of an online sales tax would be another headwind for the AIM-listed firm.

Despite considerable efforts to address ESG concerns, more damaging headlines can’t be ruled out either. Quite what this would mean for Boohoo’s management is debatable. A significant minority of holders recently opposed the re-election of co-founder Carol Kane to the board following last year’s supplier scandal.

Good probability

On balance, I’m quietly confident that the Boohoo share price has a better chance of recovering next month than dipping further. As such, I’d feel comfortable adding to my stake before August is over.

Then again, it’s the company’s long-term prospects I really care about. On this front, I fully expect the stock to be considerably more expensive in, say, five years’ time. And isn’t increasing one’s wealth slowly but surely what Foolish investing is all about?

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

ASOS share price: a warning…

Let’s start with a bit of context. In terms of trading, ASOS has been one of the few real beneficiaries from multiple UK lockdowns. With no stores to browse, it was predictable that young consumers would gravitate towards the company’s website for their fashion fix. 

For a while, sales were buoyant as people stocked up on less formal gear to make it through working from home. The ASOS share price did very well too. It rose from a low of 1,060p in April 2020 to just under 6,000p a year later. That’s an incredible gain of over 450%!

The problem is that momentum such as this can’t last forever. When news of slowing sales came last week, it was equally inevitable that some investors would be unhappy.

Another thing that may have exacerbated the fall in the ASOS share price was its relatively small ‘free float’. This is the percentage of a company’s stock that’s available to trade on the stock exchange. For ASOS, this sits at a little less than 70%, according to Stockopedia. Most companies of its size have free floats nearer 100%. In practice, this can make moves up or down more violent.

…or an opportunity?

There’s another way of looking at this. Will any of the setbacks mentioned in last week’s update still be relevant in, say, five years? I’d be surprised. 

Yes, Covid-19 is proving a stubborn beast to beat. However, two-thirds of adults have now received both jabs in the UK. While an increase in infections is very likely as all restrictions are removed, Boris Johnson appears committed to his belief that there’s no turning back now. Supply chain pressures should also be transitory.  

On top of this, ASOS’s growth strategy should have borne fruit by then. Let’s not forget that the firm recently acquired brands such as Topshop and Miss Selfridge. These should complement organic growth and help increase the company’s share of its target market here and abroad.

Great opportunity

Having tumbled last week, shares in ASOS now trade at 26 times forecast earnings. That’s still nowhere near the sort of multiple that would get value investors salivating. However, it’s a much lower valuation than ASOS has previously traded at. Moreover, investors shouldn’t compare an online giant with, say, a struggling airline or energy provider.

Sure, things could be tricky for a while. The mooted online sales tax would be another headwind for the company. Even so, this is very much a ‘known’ risk and one management has no doubt factored into its planning. 

So, while suggesting that the ASOS share price crash now makes it the bargain of the year may be taking things too far, I do think Thursday’s reaction was overdone. I therefore consider this a great opportunity for me to build a position in a company that’ll likely be worth far more than £4bn in a few years. 

The time to buy stock in a quality growth story is when the momentum jockeys have temporarily jumped off. I think that time has arrived here.

The post The ASOS share price crash: is this now the bargain of 2021? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Boohoo share price: what gives?

One potential explanation for the latest capitulation in the Boohoo share price is related to concerns over whether co-founder Mahmud Kamani will be required to give evidence in a $100m lawsuit.

As reported in the Financial Times, Boohoo has been accused of using fake promotions in the US for a number of years. It’s been claimed that customers have been presented with inflated original prices. This, in turn, made discounts seem greater than they actually were. In response, the company’s claimed that Kamani isn’t usually involved in setting prices. As such, he shouldn’t be required to answer questions.

Clearly, this isn’t the sort of headline that investors (including myself) wish to see after the hits to Boohoo’s reputation over the last year or so. This isn’t the first time it’s faced accusations of this kind either. Three years ago, the £4bn-cap had its knuckles wrapped over similar tactics and the use of psychological tricks, such as countdown clocks, in the UK. 

So, could things get worse? In the very near term, it’s hard to predict which direction the Boohoo share price may go next. A cheap stock (based on growth potential) can always get cheaper. However, I remain optimistic.

Reasons to be optimistic

For one, the company still has its cheerleaders. Indeed, the Boohoo share price rose yesterday (Tuesday) following a ‘buy’ recommendation by broker RBC. Analysts there have set a target price of 410p a pop once the contribution of new brands kicks in. 

Investors might also speculate that the fall in the Boohoo share price isn’t necessarily about Boohoo. After all, shares in fashion peer ASOS haven’t been on fire recently. The AIM-listed rival has lost 15% of its value over the last three months. This loss of momentum may be due, in part, to investors taking profits after benefitting from multiple UK lockdowns and looking for bargains elsewhere.

Bargain stock?

Once normality returns however, I suspect we could see a preference for growth over value again. Strong interim numbers in September could be a catalyst for this. So too could further evidence of progress on hitting its ESG targets and successfully integrating newly-acquired brands.

On which note, it was announced today that the company would partner with Alshaya Group in the Middle East. The latter currently runs Debenhams stores in the region. The agreement will mean that Boohoo’s brands will now feature in stores from Q4, and through a local online platform from “early 2022.“ This is an interesting development considering ASOS’s similar deal with luxury store chain Nordstrom to stock its brands in the US.

Should all the above come to pass, the current valuation of 27 times earnings could prove a bargain, in time.

Naturally, none of this is nailed on. In fact, the Boohoo share price could slide again if earnings surprise on the downside, or the company continues to make headlines for the wrong reasons. Rising Covid-19 infection levels would likely hit sentiment as well. 

As ever, it pays for me to remain diversified, just in case…

The post What’s going on with the Boohoo share price? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.