Is the ASOS share price worth £40 per stock?
ASOS is outperforming its high street rivals, with sales surging during lockdown and the business forecasting annual profits to hit the top end of its guidance. But will its shares reach analysts £40 price target in 2020?
Shares in ASOS are expected to soar in 2020, with analysts median target price for the stock at £40 per share. But is the online fashion retailer really capable of rallying a further 17% over the next five months?
Well the company has certainly performed well enough so far to justify analysts optimism despite the uniquely challenging trading environment that has been created by the coronavirus pandemic.
Last week, ASOS released its latest trading update which revealed that annual pre-tax profit is likely to come in at the upper end of market expectations after the company recorded a 10% increase in sales for the four months to the end of June.
Group sales over the period jumped to a little over £1 billion, up from £919.8 million last year, with retail sales up 10% to £983.3 million. Meanwhile, UK retail sales slid 1% to £329.2 million and US sales edged fell 2% to £124.9 million, while international sales pushed up 17% to £654.1 million.
‘Our performance in P3 shows that we are delivering against this aim despite the tough economic and social backdrop,’ ASOS CEO Nick Beighton said. ‘We have learnt a lot and adapted quickly, and ASOS finishes the period with improved underlying profitability.’
‘While we remain cautious about the consumer impact of Covid-19 looking forward, we are on track to deliver strong year-on-year profit growth and to return to positive free cash flow for the full-year,’ he added.
ASOS closed at £34.08 per share on Monday, with the stock up 2% year-to-date – outperforming the broader market with the FTSE 100 still 17% lower over the same period due to the economic impact of the Covid-19 outbreak.
Covid-19 helps online sales surge at ASOS
The retailer’s strong performance in the face of challenging market conditions means that the company does not ‘foresee a material inventory risk or write-off requirement relating to Covid-19’, with the business planning to repay cash to the UK government for furloughed workers.
‘As we said at HY results, sales were circa 20 to 25% lower when those measures were first introduced,’ ASOS said in its latest trading update on Wednesday. ‘We are therefore pleased to have delivered 10% sales growth for the period overall.’
‘This performance was supported by good new customer acquisition, strong growth in 'lockdown' product categories (casualwear, activewear, face and body), an overall improvement in underlying demand and beneficial returns behaviours showing more deliberate purchasing,’ the company added.
ASOS: Technical Analysis
Lately the stock has been trying to push above key resistance on a number of occasions at £35.60 suggesting there are some profit takers in the market following the stock’s stellar 245% ascent since the start of April, according to Victoria Scholar, presenter and market analyst at IG.
‘July’s price action has been more range bound stuck between £30 and £35 roughly, suggesting a pause for ASOS before its next move. A break out of the range could provide some clues into its future trend direction.’
How to trade stocks with IG
- Create an IG trading account or log in to your existing account
- Enter ‘ASOS’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.