The ASOS avalanche

ASOS’s share price has collapsed by 28% after the online retailer issued a profit warning.

The one-time darling of the stock market has shocked traders by announcing that full-year profits would be 30% lower than analysts’ estimates, as strength in sterling has impacted its overseas markets.

The stock has had a tremendous run over the past few years – in February it hit an all-time high when it exceeded 7100p – but the past three-months have not been kind to the company. CEO Nick Robinson spooked the market in March when he stated that profit margins would inevitably drop as expansion in Europe and China required reallocation of resources. ASOS blamed the five-and-half year high of the pound for the profit-warning, but sales growth was slowing in foreign markets despite ASOS slashing its prices.

The stock traded below 2500 this morning; the share price hasn’t been that low since January 2013. I think the stock has a long way to go to fill the gap to 4528, but could move towards 4000 in the coming weeks as today’s move is an overreaction.

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