Ahead of the firms first-half results, due on 27th of September, Boohoo’s shares were upgraded by Barclays on Tuesday. The fashion retailer shares were already classed as expensive but Barclays has upgraded their rating even more so, going from an ‘equal-weight’ rating to an ‘overweight’ one.
The target price for the AIM-listed stock was also raised 20% by analysts at the bank, to 265p from 220p after upgrading earnings per share estimates by 4% for full year 2018/19.
The reason for Barclays upgrade comes after analysis of the internet’s traffic trends for the core business and its PrettyLittleThing offshoot.
Excellent signs of progression and good trends in the last few months for both Boohoo core and PrettyLittleThing came from analysing Google Trends and ComScore. With PLT almost generating as many revenues (£120m) as its rival Missguided.
In a note to clients, Barclays said “Since initiating in March, it has been clear to us that Boohoo has a competitive advantage in its supply chain and ecommerce only model that will yield share gains for many years to come, but we haven’t been able to get comfortable enough on forecasts to find the valuation appealing. This has changed.”
The data discovered about the company provides strong confidence on current trading going into the first-half results, on the 27th September.
Boohoos other offshoot, NastyGal which is primarily focused in the US has not fully re-launched its website yet, but is expecting marketing to increase this year, with Boohoo and PLT continuing to grow stateside.
Barclays have said despite Boohoo being an expensive stock, at 55.5 times calendar 2018 forecast earnings, they feel the risk reward now stacks up. As when comparing it to internet peers on a growth adjusted basis with different earning scenarios, the new higher forecasts and confidence have them on the upside for years beyond.
Luke Ibbetson, Director at XCM commented:
“The exponential growth of Boohoo is very impressive. Fast fashion for the younger demographic of consumer is a very attractive proposition and there is a large market share to go after, but with that comes significant competition, which boohoo have done a fantastic job of staying a head of the curve with. Their fast product innovation turn around keeps them incredibly appealing to their customer base. XCM have been a partner from almost the beginning, and it’s a pleasure to be associated with such a success story.”