ASOS PLC (LSE:ASC) climbed over 30% on the back of a "mixed" trading update last week, said analysts at Panmure Liberum, "and we would caution against reading too positively into it".
Sales in the first half of the online fashion company were down another 13% at constant currencies, putting consensus expectations for a return to growth in the second half looking "highly optimistic", they added.
On the plus side, underlying profit (EBITDA) improved significantly to almost £34 million from a loss of around £16 million a year earlier, thanks to a higher full price sales mix and cost savings.
But the Pan Libs team believe the full-year guidance of £130-150 million EBITDA is based on expectations of a return to flat sales or growth in the second half, which they think is unlikely.
Therefore, the broker's forecasts remain below the bottom end of the guidance range even with a slight upgrade to its EBITDA estimate.
"The company needs a return to sales growth to generate meaningful free cash flow to pay off its still outstanding >£500m of debt."
With the shares having sunk 42% before the update, the sighs of relief led to the bounce back, and the Pan Libs target price has been cut to 350p from 445p.
A recovery in sales expectations are the "key for a meaningful recovery in the shares".