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ASOS share price climbing ahead of first-half earnings

ASOS saw a boom in business during the pandemic, but its growth seems set to continue even as lockdowns come to an end, supporting the lofty valuation and the recent gains in the share price.

Asos Source: Bloomberg

When is ASOS’ earnings date?

ASOS reports earnings on 8 April, covering its 2020/2021 first half (H1).

ASOS earnings – what does the City expect?

ASOS is forecast to report 135.1% growth in headline earnings per share, to 66p, while revenue is expected to jump 22% to £1.95 billion. It has beaten forecasts in five of the last eight results for revenue, and in six of the previous eight for earnings.

While ASOS has seen a doubling of customer numbers in the past five years, the order basket has remained remarkably steady, holding around £71.00, with £73.00 marking a peak in 2018. Meanwhile, while it saw around 2.6 billion visits to its website, only 3% of those visits resulted in an actual order. This represents a huge unfulfilled segment that could bring in substantial revenue increases if it can be successfully addressed. Operating margins have risen from 4.4% to 4.6% in the past five years, recovering from a drop to 1.3% in 2019.

Sales rose 23% for the first four months of 2020/2021, pointing towards further growth in the rest of the H1. At over 35 times earnings ASOS represents a UK version of the growth stocks that have lagged the market globally thanks to the rise in bond yields, but point towards further strong growth, particularly overseas.

How to trade ASOS earnings

A total of 29 analysts cover ASOS, with fifteen ‘buys’, nine ‘holds’ and five ‘sells’. The median target price of £55.00 is a discount of 8.6% to the current price of £60.18. The average move on results day is 11.9%.

ASOS share price – technical analysis

ASOS has continued its climb over the past year, recovering much of the ground lost since the 2018 peak. The price sits at an 18-month high, with further gains targeting £71.00 and then £77.00. A sequence of higher highs and higher lows continue the uptrend, with the recent weakness at the end of February and in early March finding support at the 50-day simple moving average (SMA). There is little sign of any reversal at present, although a move below £50.60 would provide an indication of a broader bearish move.

Asos chart Source: ProRealTime
Asos chart Source: ProRealTime

ASOS – strong growth outlook supports valuation

Despite the recent shift away from growth stocks like ASOS, the share price shows little sign of slowing down. Sales continue to bolster the valuation, and with further growth expected the shares may continue to do well.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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