ASOS full-year earnings - can the huge share price rally continue?

After an unrelenting rally since March, is the good news now all in the price for ASOS shares?

When is ASOS’ earnings date?

ASOS reports full-year earnings on 14 October.

ASOS earnings – what does the City expect?

ASOS is expected to report sales of £3.2 billion and pre-tax profit of £128 million, having previously said that it will have enjoyed a 17%-19% rise in sales, while pre-tax profit hits £130 million-£150 million.

The question for ASOS is how it can maintain the incredible momentum it has built up since March. As an online-only retailer, it was one of the few to really benefit from the huge rush to buy tech stocks and online retailers among investors as lockdowns came in around the globe. Much of the good news is now in the price, and while a near 20% rise in sales and a quadrupling of pre-tax profit is not to be sniffed at, the market will be wondering where the next catalyst can come from.

That said, ASOS seems to have put a difficult couple of years behind it. Its ordering system has been improved and the warehouse fires are now a distant memory. It is clear that the greater shift to online sales is not going away, and with margins on the up investors can be more confident about profitability. Some might balk at the price-to-eanings (P/E) ratio of around 40, but growth companies in this world are hard to find, and this alone might be enough to keep driving ASOS higher.

How to trade ASOS’ earnings

Of the 28 analysts covering ASOS, 14 have ‘buy’ recommendations, with nine ‘holds’ and five ‘sells’. The current median target price is £52.00, just below the £53.50 price as of 12 October.

ASOS share price – technical analysis

The incredible recovery in ASOS goes on, with the price now back at levels not seen since November 2018. The shares rocketed from the March lows, and then since April a steady uptrend has developed. A slight dip in August towards £45.00 provided another buying opportunity, and while gains have stalled for now around £55.00 it looks like there is no end to the current bounce in sight.

ASOS – a mini-Amazon?

It might only sell clothes, but ASOS’ presence as one of the UK’s only real online-only firms has meant its recovery since March has been impressive. Faced with a dire growth outlook for the UK economy, some will rightly worry about a downturn in consumer spending, but ASOS seems to have a committed following. A return to lockdowns could well spark a new craze in online shopping, especially ahead of Christmas. This augurs well for further gains in the share price, even from its current levels.

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