RBC Capital Markets has raised its price target on ASOS PLC (LSE:ASC) to 400p from 275p, saying the online fashion retailer has become materially more investable after clearing debt and stabilising its top line.
The broker keeps a sector perform rating, with the new target implying around 10% upside from 363p.
Analysts Richard Chamberlain and Manjari Dhar point to the sale of the mothballed Lichfield and Atlanta distribution centres for combined net proceeds of about £114 million, which should generate roughly £12 million of annual cash savings.
Combined with better underlying profitability and the refinancing of the 2026 convertible bonds, RBC expects net debt excluding leases to fall below £100 million this year, from around £185 million at the end of the 2025 financial year.
That reduced balance sheet risk has allowed the bank to cut its weighted average cost of capital to 9.5% from 10%, which drives the target increase.
RBC describes ASOS as having successfully traded sales for profits, retaining profitable customers and shedding unprofitable market share.
Gross margin rose more than 350 basis points last year, and the broker models a further 300 basis point expansion through to 2028 on higher full price sales and fewer markdowns.
Supply chain costs are down more than 500 basis points over three years.
Top-line momentum is improving, with gross merchandise value picking up sequentially through the year and a return to growth expected in the first half of the 2027 financial year, led by womenswear and the United Kingdom.
The reservations remain substantial.
ASOS is still loss-making at the pre-tax level and RBC does not expect that to change until 2028, while Frasers Group's 23% direct holding creates a potential overhang.
The shares trade on roughly 0.2 times enterprise value to 2027 sales, a heavy discount to Zalando and Boohoo that RBC considers fair given thin margins and execution risk.
